HSBC: 2021 profits nearly double 2020 profits, despite lower revenue

HSBC released on Tuesday its annual earnings report, including results from its fourth quarter ending December 31, 2021. The company reported an annual adjusted before tax profit of $21.9 billion, with an annual EPS of $0.62, on adjusted revenue of $50.1 billion.

The company’s annual EPS increased from $0.19 last year to $0.62, far above pandemic levels. In 2019, the company had a reported EPS of $0.30.

The bank announced that, though adjusted profits have nearly doubled over the previous year ($21.9 billion compared to $12.3 billion), adjusted revenue was down 3% for the year. HSBC said in the press release that the decrease in revenue was due to lower global interest rates and a decrease in revenue in Markets and Securities Services.

Expected credit losses (ECL) were a big contributor to the decrease in revenue, the company indicated, as loans provided during the pandemic failed to yield profit.

However, HSBC reported revenue for the fourth quarter was up 2% to $12.1 billion, with an adjusted before tax profit of $4 billion. The company said the largest contributor was commercial banking thanks to growth in Credit and Lending. Adjusted profit before tax was up 79% over the previous year, a strong indication of a healthier credit economy as ECL decreased. Operating expenses were also down for the quarter.

“We have good momentum coming into 2022 and are confident that we can continue to execute against our strategy,” Group Chief Executive Noel Quinn said in the earnings report. He went on to say the company is aware of potential challenges that may arise due to COVID-19 and high inflation rates.

According to the Bureau of Labor Statistics, inflation in the US is currently at 7%, the highest it’s been since the early 1980s. And while travel is ramping back up — Bank of America recently reported a nearly 120% increase in travel spending, with credit card spending up 24% over pre-pandemic levels — more challenges regarding COVID could still develop.

“Throughout HSBC’s history, our people have always demonstrated great professionalism and commitment to those we serve, and that is as evident today as it has ever been,” Quinn said. “Despite the personal and professional challenges they continue to face after two years of living with the pandemic, I am proud of my colleagues, and the sense of duty and care they continue to show towards our customers and each other. Our success — now and in the future– is testament to them and all they continue to do for our bank.”