HSBC has reported profit after tax of $4.6bn, which was $2.1bn or 82% higher than in 1Q20; profit before tax of $5.8bn was $2.6bn or 79% higher. The results beat analyst expectations of $3.346bn, according to estimates compiled by the bank.
Reported revenue of $13.0bn was $0.7bn or 5% lower than in 1Q20. The reduction primarily reflected a fall in net interest income as a result of the impact of lower global interest rates.
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This reduction was more than offset by a net release of reported expected credit loss (ECL) in 1Q21 due to an improvement in the forward economic outlook, mainly in the UK.
Operating expenses rose due to higher restructuring and other related costs and continued investment in the bank’s digital capabilities.
While average interest-earning assets grew compared with 1Q20, interest-bearing liabilities also increased, resulting in continued downward pressure on net interest margin.
The London-headquartered bank has surpassed the consensus estimates in each of the last two quarters, mainly due to strong growth in sales & trading revenues and a sequential decline in provisions of loan losses over the third and fourth quarters.
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By GlobalDataHowever, HSBC’s revenues for the full year 2020 were 10% lower than the 2019 figure.
Increase in Wealth & Personal Banking (WPB)
Reported loans and advances to customers of $1.0tn were $2bn higher, which included adverse effects of foreign currency translation differences of $4bn.
Customer accounts of $1.7tn increased by $7bn on a reported basis, including adverse foreign currency translation differences of $5bn.
On a constant currency basis, customer accounts were $12bn higher, with growth across all of the bank’s global businesses.
The increase was primarily in Wealth & Personal Banking (WPB) in the UK, as Covid-19 restrictions continued to result in lower consumer spending and higher deposit and savings balances.
There continued to be a movement of funds from term accounts to call accounts as customers showed a preference for liquidity while interest rates are low.
Deferred tax liabilities
The effective tax rate for 1Q21 of 21.0% was lower than 22.3% in 1Q20.
It was announced in the UK Budget on 3 March 2021 that the main rate of UK corporation tax will increase with effect from 1 April 2023.
The Group’s UK deferred tax assets and liabilities will be remeasured to reflect this increase when the Finance Act 2021 is substantively enacted, which is expected to be either the second or third quarter of 2021.
Based on the closing balances at 31 March 2021, this remeasurement would result in an increase in the Group’s net deferred tax liability of approximately $150m, the majority of which would be recorded in other comprehensive income.
