HSBC raises divi to quash break-up talk

HSBC shares rose to their highest level since 2019 yesterday after making a massive payout to shareholders – amid a battle with investors calling for the bank to break up.

The lender reported a 7.3 per cent drop in pre-tax profit to £14.6 billion for 2022, but that beat City’s expectations and was accompanied by the announcement of the highest total dividends since 2018.

HSBC has also committed a further payment to be made when the sale of its Canadian business is completed later this year.

The rewards seemed calculated to address pressure led by its largest shareholder Ping An, a Chinese insurance giant, for a break-up of the bank – which, while based in London, has its origins in Hong Kong and most of its earn money in Asia.

But HSBC said the results showed the existing strategy was working and CEO Noel Quinn said the group had “fundamentally transformed the profitability of loss-making or near-loss businesses in the UK and Europe.”

Quinn indicated that the pressure to keep costs down will not ease as it aims to cut a further £250m this year.

That is likely to spark more fear for HSBC’s UK branch network after the bank said in November it would cut the number of outlets by a quarter.

The lender’s British boss, Ian Stuart, was criticized earlier this month after telling MPs the closure program is ‘what customers want’.

Meanwhile, HSBC and other lenders have come under fire for being quick to raise interest rates when interest rates rise, but less willing to reward depositors.

The gap between those two rates, known as net interest margin, is a key measure of making profits for banks — and HSBC reported an increase in that measure yesterday.

Sir Philip Augar, an independent banking expert, told BBC Radio 4’s Today programme: ‘I think depositors can put legitimate questions to the banks.

‘Why are you so quick to raise our mortgage rates and… so slow to pass on the impact of the rate increase on our savings accounts? Especially since borrowers are struggling to pay interest in a time of high inflation and living standards are under pressure.’

Details of Quinn’s pay package, which rose 14 per cent to £4.7 million, are also likely to spark anger. If the long-term incentives are included, this could total £10.5 million.

But investors were not deterred by steering shares an increase of 4.3 percent, or 26.8p, higher to 647.5p – the highest level since September 2019.

Quinn heads to China for the first time since the pandemic to meet with investors and build confidence in HSBC’s strategy.

HSBC continued to insist yesterday that a break was out of the question.

Chairman Mark Tucker said: “It is and remains our assessment that alternative structural options would not provide shareholder value. On the contrary, they would have a material negative effect on the value.’