HSBC has reported stronger than expected profits and says the economic outlook is looking brighter.
Europe’s biggest bank by assets reported an income of $5.8bn (£4.2bn) for the January-to-March period, up from $3.2bn a year earlier.
More than half its profits came from Asia, the region where the bank does much of its business.
The improved outlook led HSBC to release a number of the cash it had put aside for bad loans.
Last year, HSBC had put aside $3bn to hide bad debts, but it’s now released $400m of that following “an improvement within the economic outlook, notably within the UK”.
Solid growth in its mortgage business within the UK and Hong Kong also helped to spice up profits.
The bank says it’s on target with its restructuring plan, including cutting 35,000 jobs and that specialize in earning more client fees in Asia.
The jump in profits marks a turnaround for HSBC, which reported a 34% drop by profits for 2020, partly due to the impact from the coronavirus pandemic.
Noel Quinn, HSBC’s group chief executive, said the bank had made a “good start to the year”.
He said: “Global banking and markets had an honest quarter, and that we saw solid business growth in strategic areas, including Asia Wealth and trade finance, and mortgages in Hong Kong and the UK.
“We also strengthened our lending pipelines in our retail and wholesale businesses.”
The bulk of the bank’s profits came from Asia, where HSBC made $3.8bn, but it said it had been profitable altogether regions, with its UK business reporting profits of $1bn.
Although HSBC said it expected better economic conditions in 2021, it predicted continued uncertainty as countries emerge from the pandemic at different speeds and as governments pare back support measures.
While its profits were stronger, its revenues were down 5% to $13bn due to the impact of rate of interest reductions altogether global businesses.
The bank expects lending to still grow in 2021, although that growth depends on the worldwide recovery from the pandemic.
“There doesn’t appear as if there’s an instantaneous cure for the bank’s underlying ailment, the ultra-low rates plaguing the banking sector,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.
“HSBC isn’t alone in feeling the squeeze of net interest margins, which tightened again slightly over the quarter, but other banks with huge investment banking arms can capitalize on the trading rise over the past year.
“The banknotes that the outlook remains highly uncertain. HSBC’s resilience might be tested as governments remove the arms of support that are wrapped around their economies to assist them limp through the crisis.”