HSBC reports $ 19 b pre-tax profits in 2010

HSBC announced recently that it has made a profit before tax of US$ 19,037 m, an increase of US$ 11,958 m, or 169%, compared with 2009. Net interest income of US$ 39,441 m was US$ 1,289 m, or 3.2%, lower than 2009.

Net operating income before loan impairment charges and other credit risk provisions of US$ 68,247 m was US$ 2,066 m, or 3.1%, higher than 2009.

Total operating expenses of US$ 37,688 m rose by US$ 3,293 m, or 9.6%, compared with 2009. On an underlying basis operating expenses were up 8% compared with 2009.

HSBC’s cost efficiency ratio was 55.2% compared with 52.0% in 2009. Loan impairment charges and other credit risk provisions were US$ 14,039 m in 2010, US$ 12,449 m lower than 2009.

HSBC Group Chairman Douglas Flint said: “It is reassuring to see our Personal Financial Services businesses returning to profitability in aggregate and Commercial Banking growing significantly, largely in emerging markets. These achievements augmented another year of strong performance in Global Banking and Markets.”

Earnings per share improved strongly, rising by 115% to reach US$ 0.73 per share.

The Group’s capital position also strengthened with the core tier 1 ratio, the ratio most favoured by regulators as it comprises equity capital after regulatory adjustments and deductions, increasing from 9.4% to 10.5%, largely due to profit retention throughout the year.

As a consequence of this strong capital generation, together with greater clarity on the direction of regulatory reform of capital requirements and an improving economic backdrop in the developed world – particularly in the United States – the Board has approved increases in both the final dividend payment in respect of 2010 and the planned quarterly dividends for 2011.

The final dividend for 2010, payable on 5 May 2011 to shareholders on the register on 17 March 2011, will be 12 cents per ordinary share, up from 10 cents at the same point last year. For the remainder of 2011 we plan to pay quarterly dividends of nine cents for each of the first three quarters compared with eight cents in respect of the equivalent quarters of 2010.

HSBC Group Chief Executive Stuart Gulliver said underlying financial performance continued to improve in 2010 and shareholders continued to benefit from HSBC’s universal banking model. All regions and customer groups were profitable, as Personal Financial Services and North America returned to profit.

Commercial Banking made an increased contribution to underlying earnings and Global Banking and Markets also remained strongly profitable, albeit behind 2009’s record performance, reflecting a well-balanced and diversified business.

Credit experience continued to improve, as a result of a stronger global economy and our actions to reduce balance sheet risk. As a globally-connected bank with a growing presence across the world’s faster-growing regions, HSBC also benefitted from higher trade volumes and strong momentum in emerging economies, especially in Asia. Asia contributed the largest proportion to underlying pre-tax profits, while the contributions made by Latin America and the Middle East also increased.

Together with its conservative management of the balance sheet, this improved performance allowed it to concentrate on serving its customers and to further strengthen its capital position.