Shares in HSBC (HSBA) only traded 1% higher despite it reporting first-half results ahead of market expectations.

The earnings beat was helped by a larger than expected net provision release of £0.7 billion that flattered the group’s results.

This provision related to money put aside to cover potential bad debts during the pandemic, and it has been a recurrent feature of all the UK banks during this reporting season.

Many banks found they were too cautious during the crisis and are now releasing some of the potential bad debt provisions, justified on the basis of an improving macro-economic environment.

However it is important to acknowledge that these are exceptional items, and are one-off in nature.

Pre-tax profits at HSBC rose to $10.8 billion, up from $4.3 billion a year earlier. Reported earnings per share of $0.17 was ahead of a consensus figure of $0.12. However the interim dividend of $0.07 per share was below a consensus forecast of $0.08.

On a more positive note, the group’s Pivot to Asia strategy appears to be progressing well.

HSBC is making a push in wealth management and commercial banking to generate double digit growth and has targeted Asian markets including Hong Kong, China and Singapore.

On this morning’s investor conference, chief executive Noel Quinn emphasised that the group’s Asia wealth strategy was gaining traction with strong growth in wealth balances. Furthermore there are promising signs of early growth in Asian lending volumes and fee income.

By Mark Gardner

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Issue Date: 02 Aug 2021