HSBC Annual Results 2020

[idpickering]

Our shareholders
It was a difficult year for our shareholders. The Covid-19 pandemic and the impact of geopolitics weighed heavily on our share price
throughout 2020. In March, we cancelled the payment of our fourth interim dividend for 2019 at the request of our lead regulator, and
also agreed not to make any quarterly or interim dividend payments until the end of 2020. This particularly affected shareholders who rely
on our dividend for income. It was a priority for the management team to get back to being able to pay dividends by the end of the year,
and we were pleased to be able to recommend the payment of an interim dividend for 2020.
Dividends are hugely important, but so is capacity for growth. To deliver both, we are adopting a new policy designed to provide
sustainable dividends, offering good income while giving management the flexibility to reinvest capital to grow the firm over the medium
term. We will consider share buy-backs, over time and not in the near term, where no immediate opportunity for capital redeployment
exists. We will also no longer offer a scrip dividend option, and will pay dividends entirely in cash.
The last 12 months were tough, but I am highly focused on turning our performance around in 2021 and beyond. I strongly believe that
the combination of our growth plans and our new dividend policy will unlock greater value for our shareholders in the years to come

And later;

Interim dividend for 2020
After the end of the year, the Directors approved an interim dividend in respect of the financial year ended 31 December 2020 of $0.15
per ordinary share, a distribution of approximately $3,055m. The interim dividend will be payable on 29 April 2021 to holders on the
Principal Register in the UK, the Hong Kong Overseas Branch Register or the Bermuda Overseas Branch Register on 12 March 2021. No
liability was recorded in the financial statements in respect of the interim dividend for 2020.
The dividend will be payable in US dollars, or in pounds sterling or Hong Kong dollars at the forward exchange rates quoted by HSBC
Bank plc in London at or about 11.00am on 19 April 2021, or a combination of these currencies. Particulars of these arrangements will be
sent to shareholders on or about 24 March 2021 and changes to currency elections must be received by 15 April 2021. The ordinary
shares in London, Hong Kong and Bermuda, and American Depositary Shares (‘ADSs’) in New York will be quoted ex-dividend on 11
March 2021. The Group has decided to discontinue the scrip dividend option as it is dilutive, including to dividend per share progression
over time.
The dividend will be payable on ADSs, each of which represents five ordinary shares, on 29 April 2021 to holders of record on 12 March
2021. The dividend of $0.75 per ADS will be payable by the depositary in US dollars. Alternatively, the cash dividend may be invested in
additional ADSs by participants in the dividend reinvestment plan operated by the depositary, elections must be received by 9 April 2021.
Any person who has acquired ordinary shares registered on the Principal Register in the UK, the Hong Kong Overseas Branch Register or
the Bermuda Overseas Branch Register but who has not lodged the share transfer with the Principal Registrar, Hong Kong or Bermuda
Overseas Branch registrar should do so before 4.00pm local time on 12 March 2021 in order to receive the dividend.
Ordinary shares may not be removed from or transferred to the Principal Register in the United Kingdom, the Hong Kong Overseas
Branch Register or the Bermuda Overseas Branch Register on 12 March 2021. Any person wishing to remove ordinary shares to or from
each register must do so before 4.00pm local time on 11 March 2021.

Full item downloadable here via;

https://www.hsbc.com/investors/results- ... ouncements

nb, HSBC surged 6% on Hong Kong market on this release.

[Dod101]

Thanks, Ian. I think US$0.15 is about as good as we could expect from HSBC at this time. It lies midway between their previous interims of 10 cents and the final of 21 cents. Not a surprise but hopefully we can see them back to regular dividend payments in the future.

Like other banks, they have lots of spare capital (and thus capacity for paying dividends) with a CET ratio of 15.9% at year end. Interesting that they have scrapped any scrip dividend option. They have not said why but I always thought that this was a daft idea because having paid scrip dividends they then went into the market and bought back an equivalent number of shares, just so keep some shareholders happy.

It is difficult to comment on the actual results because of course everything was affected by Covid.

Dod

[Dod101]

I should have said that I think they have kept to their word. They said towards the end of last year I think it was that any dividend paid at this stage would be 'meaningful and not simply a token. I think they have managed that. Good for them.

Dod

[Arborbridge]

I should have said that I think they have kept to their word. They said towards the end of last year I think it was that any dividend paid at this stage would be 'meaningful and not simply a token. I think they have managed that. Good for them.

Dod

They do seem reliable in that respect: they were the only bank I knew which paid out during the banking crisis.

Arb.

[idpickering]

I should have said that I think they have kept to their word. They said towards the end of last year I think it was that any dividend paid at this stage would be 'meaningful and not simply a token. I think they have managed that. Good for them.

Dod

They do seem reliable in that respect: they were the only bank I knew which paid out during the banking crisis.

Arb.

I'm glad that they're kept to their word too. HSBC might just reappear in my HYP soon. I'm still a bit cautious/hesitant regarding that prospect though to be honest.

Further to the subject of this thread, here's the RNS;

2020 Results

https://www.investegate.co.uk/hsbc-hold ... 00029652P/

And this;

2020 Results video webcast and conference call

https://www.investegate.co.uk/hsbc-hold ... 00029665P/

Ian.

[Dod101]

I should have said that I think they have kept to their word. They said towards the end of last year I think it was that any dividend paid at this stage would be 'meaningful and not simply a token. I think they have managed that. Good for them.

Dod

They do seem reliable in that respect: they were the only bank I knew which paid out during the banking crisis.

Arb.

Indeed and they were the only one at that time which was still lending to the interbank market then as well. They have the culture you see...........
As you know I have considerable faith in them, despite the current geo political difficulties. Interesting also in the announcement that they have made some substantial changes to their Board of Directors. I would need to look carefully at the background of the new Directors but Tucker has removed a lot of old timers.

Dod

[monabri]

The interim dividend is a lot higher than I expected- I'd pencilled in 5p after conversion. I checked on "dividend data" which had already been updated to reflect the announcement. Why are they paying an "interim" dividend and not a Q4 or "final"?


https://www.dividenddata.co.uk/dividend ... ?epic=HSBA

Code: Select all

Year End | Q1     | Q2     | Q3     | Q4     | Special | Total  | Growth
12/2020  | 0.00¢  | 0.00¢  | 0.00¢  | 15.00¢ |       - | 15.00¢ | -50.00%
12/2019  | 10.00¢ | 10.00¢ | 10.00¢ | 0.00¢  |       - | 30.00¢ | -41.18%


Edit

I see they differentiate between quarterly and interim in the text

"In March, we cancelled the payment of our fourth interim dividend for 2019 at the request of our lead regulator, and
also agreed not to make any quarterly or interim dividend payments until the end of 2020. This particularly affected shareholders who relyon our dividend for income. It was a priority for the management team to get back to being able to pay dividends by the end of the year.."

[Dod101]

I assume because they do not have to seek shareholder approval for an interim, even if it is a 'final' for the year. Quite a few companies do that as they do not then have to wait until after the AGM before making payment.

Incidentally Ian reported that the HK share price surged 6% after the announcement. Presumably it has fallen back because the London price is down about 2%.

Dod

[Arborbridge]

Indeed and they were the only one at that time which was still lending to the interbank market then as well. They have the culture you see...........
As you know I have considerable faith in them, despite the current geo political difficulties. Interesting also in the announcement that they have made some substantial changes to their Board of Directors. I would need to look carefully at the background of the new Directors but Tucker has removed a lot of old timers.

Dod

But what of the benefit culture? Will it change as a result? (PS I know tht it is sid that culture changes very slowly, even if board members change - but try telling that to GEC investors).

Arb.

[moorfield]

Annual Report page 206, "Financial Decisions" (blink and you'll miss it), my bold:

The Board has adopted a policy designed to provide sustainable
dividends going forward. We intend to transition towards a target
payout ratio of between 40% and 55% of reported earnings per
ordinary share (‘EPS’) for 2022 onwards, with the flexibility to
adjust EPS for non-cash significant items such as goodwill or
intangibles impairments.

and

The Group will not be paying quarterly dividends during 2021 but
will consider whether to announce an interim dividend at the 2021
half-year results in August. The Group will review whether to
revert to paying quarterly dividends at or ahead of its 2021 results
announcement in February 2022.

Reading between the lines, another $0.15 dividend for 2021, before the new dividend policy kicks in from 2022.

I put HSBA on an estimated forecast yield of 2.5% this morning (subject to exchange rate fluctuations).

[Dod101]

Indeed and they were the only one at that time which was still lending to the interbank market then as well. They have the culture you see...........
As you know I have considerable faith in them, despite the current geo political difficulties. Interesting also in the announcement that they have made some substantial changes to their Board of Directors. I would need to look carefully at the background of the new Directors but Tucker has removed a lot of old timers.

Dod

But what of the benefit culture? Will it change as a result? (PS I know tht it is sid that culture changes very slowly, even if board members change - but try telling that to GEC investors).

Arb.

I have no idea about the benefit culture and whether it will change but as for GEC, it had one very strong leader (Arnold Weinstock) who was replaced by another (George Simpson). They were very different characters and it is probable that they were both able in effect to set the culture.

HSBC is very different in that respect and has a deep seated culture, conservative and long standing.

Dod

[moorfield]

I'm glad that they're kept to their word too. HSBC might just reappear in my HYP soon. I'm still a bit cautious/hesitant regarding that prospect though to be honest.

No. Since this is the HYP Practical board after all, let's remind ourselves of what has become obvious this morning (see also my previous post):

HSBA is a low yield share.

Neither a candidate for new purchase or top up imo (I apply a sort of equivalence principle to both actions), but I respect those of a firmer pyadic constitution will continue to hold.

Now the fog has cleared and it is offering a yield less than half of my benchmark, I will be selling shortly. Despite crystallizing a capital loss, I can double if not treble forecast income over the next few years on what's left from dividends elsewhere. I'm not going to hang around waiting for HSBA's new "sustainable" dividend to catch up.

[monabri]

Reading between the lines, another $0.15 dividend for 2021, before the new dividend policy kicks in from 2022.

I put HSBA on an estimated forecast yield of 2.5% this morning (subject to exchange rate fluctuations).

That would be disappointing and would go against the recognition of dividends being important to shareholders.

[idpickering]

I'm glad that they're kept to their word too. HSBC might just reappear in my HYP soon. I'm still a bit cautious/hesitant regarding that prospect though to be honest.

No. Since this is the HYP Practical board after all, let's remind ourselves of what has become obvious this morning (see also my previous post):

HSBA is a low yield share.

Neither a candidate for new purchase or top up imo (I apply a sort of equivalence principle to both actions), but I respect those of a firmer pyadic constitution will continue to hold.

Now the fog has cleared and it is offering a yield less than half of my benchmark, I will be selling shortly. Despite crystallizing a capital loss, I can double if not treble forecast income over the next few years on what's left from dividends elsewhere. I'm not going to hang around waiting for HSBA's new "sustainable" dividend to catch up.

I did mention that I was reluctant about maybe bringing them back on board and I don’t need reminding that this is HYPP thank you. If that is indeed the yield on offer HSBC will not feature in my HYP any time soon.

Ian.

[IanTHughes]

I'm glad that they're kept to their word too. HSBC might just reappear in my HYP soon. I'm still a bit cautious/hesitant regarding that prospect though to be honest.

No. Since this is the HYP Practical board after all, let's remind ourselves of what has become obvious this morning (see also my previous post):

HSBA is a low yield share.

Neither a candidate for new purchase or top up imo (I apply a sort of equivalence principle to both actions), but I respect those of a firmer pyadic constitution will continue to hold.

Now the fog has cleared and it is offering a yield less than half of my benchmark, I will be selling shortly. Despite crystallizing a capital loss, I can double if not treble forecast income over the next few years on what's left from dividends elsewhere. I'm not going to hang around waiting for HSBA's new "sustainable" dividend to catch up.

Yes, if one accepts your analysis of future dividend prospects of HSBA, then it is indeed a low-yield share. Of course, another "Crystal Ball" may well show a different future, maybe one which indicates that HSBA is a "high-yield" share.

You must do what you think is right for you, but you would be well advised not to fool yourself into thinking that you know the future any better than anyone else. I can assure you that you do not!


Ian

[Wizard]

I'm glad that they're kept to their word too. HSBC might just reappear in my HYP soon. I'm still a bit cautious/hesitant regarding that prospect though to be honest.

No. Since this is the HYP Practical board after all, let's remind ourselves of what has become obvious this morning (see also my previous post):

HSBA is a low yield share.

Neither a candidate for new purchase or top up imo (I apply a sort of equivalence principle to both actions), but I respect those of a firmer pyadic constitution will continue to hold.

Now the fog has cleared and it is offering a yield less than half of my benchmark, I will be selling shortly. Despite crystallizing a capital loss, I can double if not treble forecast income over the next few years on what's left from dividends elsewhere. I'm not going to hang around waiting for HSBA's new "sustainable" dividend to catch up.

I think it is somewhat more nuanced than that. Or put another way, I think you are a little premature in declaring that the fog has cleared.

HSBC may be a low yield share, it may not, hard to call as that of course depends how the market prices them. Based on only a quick skim of the releases the proposed level of dividend, at $0.15, appears roughly consistent with their new policy of 40% to 55% of EPS. The unadjusted EPS was $0.32. So that is a c.47% payout.

The difficulty comes in balancing how two factors will play out. There is a $0.13 significant adjustment to EPS taking it down to $0.19, they have given themselves scope to recognise that in their policy. However, reported EPS is down c37% on 2019, primarily due to Covid.

The future dividend and attractiveness to income seekers will be a function of how good a job management do of rebuilding EPS, the scale of significant non-cash adjustments to EPS and the boards view about taking account of those adjustments when setting the dividend.

I would be interested to see if others agree or disagree with my thoughts.

[idpickering]

I assume because they do not have to seek shareholder approval for an interim, even if it is a 'final' for the year. Quite a few companies do that as they do not then have to wait until after the AGM before making payment.

Incidentally Ian reported that the HK share price surged 6% after the announcement. Presumably it has fallen back because the London price is down about 2%.

Dod

I did indeed Dod. That was put up on Bloomberg tv not long after the results were released at 0400hrs UK time today.

Ian.

[Dod101]

No. Since this is the HYP Practical board after all, let's remind ourselves of what has become obvious this morning (see also my previous post):

HSBA is a low yield share.

Neither a candidate for new purchase or top up imo (I apply a sort of equivalence principle to both actions), but I respect those of a firmer pyadic constitution will continue to hold.

Now the fog has cleared and it is offering a yield less than half of my benchmark, I will be selling shortly. Despite crystallizing a capital loss, I can double if not treble forecast income over the next few years on what's left from dividends elsewhere. I'm not going to hang around waiting for HSBA's new "sustainable" dividend to catch up.

If you really think that why on earth did you not sell in April 2020 when they were forced to desist from paying a final for 2019? It did not take a crystal ball to see that a) they would not be paying quarterly dividends for 2020 and b) that any dividend now would be relatively modest. In fact, it is rather more than some of us were expecting , and there was never any prospect of their simply paying dividends for 2021 as though the pandemic had never happened.

I am not sure I would add to my still considerable holding bit I will not be selling either.

Dod

[IanTHughes]

I assume because they do not have to seek shareholder approval for an interim, even if it is a 'final' for the year. Quite a few companies do that as they do not then have to wait until after the AGM before making payment.

Incidentally Ian reported that the HK share price surged 6% after the announcement. Presumably it has fallen back because the London price is down about 2%.

I did indeed Dod. That was put up on Bloomberg tv not long after the results were released at 0400hrs UK time today.

The price on the Hong Kong exchange did indeed "jump" significantly at the instant the results were announced. That gain however was very soon dissipated to a closing price way below that intra-day high, although still up on the day.


Ian

[dealtn]

If you really think that why on earth did you not sell in April 2020 when they were forced to desist from paying a final for 2019?

Perhaps because the price available in April wasn't seen as being good enough. It is higher now. People have all manner of reasons for selling, or not selling (and indeed buying and not buying). I imagine price to be high up the list of such reasons.