HSBC More Than Doubles Profit
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HSBC more than doubled its profit in 2021, despite flat revenues and costs, driven by a significant improvement in expected credit losses. HSBC reported $14.7 billion in profit after tax for 2021, according to its latest results, marking a 141 percent increase compared to 2020. Revenue ($49.6 billion, down 2 percent) and operating expenses ($32.1 billion, up 1 percent) stayed flat but the bank saw a significant improvement in expected credit losses (ECL) with a net release of $900 million compared to an $8.8 billion charge last year.
The global economic recovery supported our 2021 financial performance, as the release of expected credit losses resulted in an improvement in the profitability of the Group and all global businesses, said HSBC group chief executive Noel Quinn.
Our interest-rate sensitive business lines continued to be adversely impacted by low-interest rates, but our net interest margin remained broadly stable during 2021 and the outlook is now significantly more positive.
In addition to better ECLs, the bank also highlighted a higher share of profit from its associates as a key driver of the positive results in 2021, increasing 11 percent to $29.5 billion. HSBC’s principal associates include Bank of Communications and the Saudi British Bank.
The bank was profitable across all regions, most notably in Europe where its U.K. business posted a pre-tax profit of $3.5 billion compared to a $4.2 billion loss in the previous year.
But pre-tax profit in Asia dipped 5 percent to $12.2 billion with a material decrease in Hong Kong from $8.2 billion in 2020 to $5.9 billion in 2021.
While the bank observes «good business momentum» coming into 2022 in most areas, with expectations of mid-single-digit lending growth, Asia may continue to see headwinds.
The bank expects weaker performance for Asia in the first quarter, specifically within the region’s wealth unit.
Questions & Answers
Q.What was the main reason for HSBC's significant profit increase in 2021?
What was the main reason for HSBC's significant profit increase in 2021?
The substantial increase in profit was primarily due to a significant improvement in expected credit losses (ECL). HSBC saw a net release of $900 million in ECLs, compared to an $8.8 billion charge the previous year.
Q.Did all of HSBC's business regions perform better in 2021?
Did all of HSBC's business regions perform better in 2021?
No, performance varied by region. While the UK business in Europe notably improved, Asia's pre-tax profit dipped 5 percent. Hong Kong, specifically, saw a material decrease in profit.
Q.How did flat revenues and costs affect the profit increase?
How did flat revenues and costs affect the profit increase?
Despite revenues remaining flat and operating expenses increasing slightly, the profit still more than doubled. The substantial improvement in expected credit losses was significant enough to drive this growth.
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