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Profits soar at HSBC, will banks face a windfall tax?

Simon English
·2-min read
A sign for a branch of HSBC (PA Wire)
A sign for a branch of HSBC (PA Wire)

HSBC set itself up to return to paying dividends today, as profits jumped 80% to $5.8 billion in the first quarter and bad debts from Covid tumbled.

Chief executive Noel Quinn dismissed talk that banks could face a windfall tax on this year’s profits, noting how rough last year had been on shareholders in particular.

“These are not excess profits, they are acceptable profits,” he told The Standard. “If you look at last year, banks were not giving an adequate return to investors. What you have now is the banking sector returning to acceptable profits to meet shareholder expectations.”

HSBC paid no quarterly dividend but looks on track to pay one for the half-year. Profits in the UK hit $1 billion, but the Asian arm remains by far the most important for the bank.

Governments withdrawing support for economies as lockdowns end might lead to Covid loans not being repaid, but so far it looks good, said Quinn.

“I give a lot of credit to the UK government for the amount of support they have offered,” he said. “They have given quite a clear signal they need to now sensibly unwind that, it is the right time to do so. There will be implications for credit, but on the evidence we have at the moment, loans are in line with expectations.”

HSBC set aside just $400 million for bad debts, compared to $3 billion a year ago.

The bank expects lending to continue to grow in 2021, although that growth depends on the global recovery from the pandemic.

HSBC recently opened up its executive floor in Canary Wharf, closing private offices for executives. “We have been locked in our offices at home, we didn’t want to be locked in offices at work,” said Quinn.

“On the first day back, I went to my office, and Ewen (Stephenson, the CFO) went to his. At the end of the day we came out and said, what are we doing this for? We want to work differently.”

He expects staff to return around three days a week in future.

HSBC shares rose 7p to 430p.

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