HSBC Interim Results

[idpickering]

Key highlights

– Moving forward with the next phase of our strategy, which was outlined in June
– Good momentum across our four global businesses, which saw their adjusted revenue rise 7 per cent in the first half, compared with 1H17
– Reported profit before tax was up 5% compared with 1H17; adjusted profit before tax was down by 2%, due to increased investment in the business
– Adjusted operating expenses of US$16.4bn were US$1.2bn or 8% higher than 1H17, reflecting continued investments to grow the business and enhance our digital capabilities
– Strong common equity tier one ratio of 14.2%, which included the impact of foreign currency movements and the US$2 billion dollar share buy-back we announced in May

https://www.hsbc.com/investor-relations ... esults2018

From the main release;

Dividends

We plan to sustain the annual dividend in respect of the year
at its current level for the foreseeable future. Growing our
dividend in the future will depend on the overall profitability
of the Group, delivering further release of less efficiently
deployed capital and meeting regulatory capital requirements
in a timely manner.

Full details available here (if you like wading through treacle);

https://www.hsbc.com/investor-relations

[idpickering]

Here's the RNS on this;

Financial Performance

• Reported revenue of $27.3bn was 4% higher, with growth in all of our global businesses. This was mainly driven by higher deposit margins and balance growth in RBWM, and GLCM growth within CMB, mainly in Hong Kong, as well as the favourable effects of currency translation. These increases were partly offset by lower revenue in Corporate Centre. Adjusted revenue of $27.5bn was 2% higher, excluding the effects of currency translation and movements in significant items.

• Reported operating expenses of $17.5bn were 7% higher, primarily reflecting investments to grow the business, mainly in RBWM and GB&M, and continued investment in digital across all our global businesses. Adjusted operating expenses of $16.4bn were 8% higher, excluding the effects of currency translation and movements in significant items.

• Reported profit before tax of $10.7bn was 5% higher, reflecting a net favourable movement in significant items and favourable currency translation. Adjusted profit before tax of $12.1bn was 2% lower, as revenue growth and lower expected credit losses were partly offset by higher operating expenses.

• Lending growth in 1H18 was $43bn, increasing net loans and advances to customers by 5% since 1 January 2018.

• Strong capital base with a common equity tier 1 ('CET1') ratio of 14.2% and a CRD IV leverage ratio of 5.4%.

And later;

[quoteSecond interim dividend for 2018

On 6 August 2018, the Directors declared a second interim dividend in respect of 2018 of $0.10 per ordinary share. The ordinary shares in London, Hong Kong, Paris and Bermuda, and the American Depositary Shares ('ADSs') in New York, will be quoted ex-dividend on 16 August 2018. The dividend will be payable on 27 September 2018 to holders of record on 17 August 2018.

The dividend will be payable in US dollars, sterling or Hong Kong dollars, or a combination of these currencies, at the forward exchange rates quoted by HSBC Bank plc in London at or about 11.00am on 17 September 2018. A scrip dividend will also be offered. Particulars of these arrangements will be sent to shareholders on or about 29 August 2018 and elections must be received by 13 September 2018.

The dividend will be payable on ordinary shares held through Euroclear France, the settlement and central depositary system for Euronext Paris, on 27 September 2018 to the holders of record on 17 August 2018. The dividend will be payable in US dollars or as a scrip dividend. Particulars of these arrangements will be announced through Euronext Paris on 9 August 2018, 24 August 2018 and 28 September 2018.

The dividend will be payable on ADSs, each of which represents five ordinary shares, on 27 September 2018 to holders of record on 17 August 2018. The dividend of $0.50 per ADS will be payable by the depositary in US dollars or as a scrip dividend of new ADSs. Elections must be received by the depositary on or before 7 September 2018. Alternatively, the cash dividend may be invested in additional ADSs by participants in the dividend reinvestment plan operated by the depositary.

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, the Hong Kong or Bermuda Branch Registrar should do so before 4.00pm local time on 17 August 2018 in order to receive the dividend.

Ordinary shares may not be removed from or transferred to the Principal Register in the UK, the Hong Kong Overseas Branch Register or the Bermuda Overseas Branch Register on 17 August 2018. Any person wishing to remove ordinary shares to or from each register must do so before 4.00pm local time on 16 August 2018.

https://www.investegate.co.uk/hsbc-hold ... 00038513W/

[Dod101]

I cannot see this being very well received. Expenses up, profits more or less static depending on how you measure them and dividend held for the foreseeable future.

This share is now like a bond. The price will go nowhere in the near future . Only the yield will keep most of us holding.

Dod

[idpickering]

I cannot see this being very well received. Expenses up, profits more or less static depending on how you measure them and dividend held for the foreseeable future.

This share is now like a bond. The price will go nowhere in the near future . Only the yield will keep most of us holding.

Dod

That's a very accurate assessment in my opinion Dod. FWIW the share is down just over 1% as I type. I bought HSBC for my HYP in the first instance for the yield on offer, the exposure to the Asian markets, it's mammoth size, and the diversification it gave my HYP. They account for 3.3% in capital value terms of my HYP, and I'm of no mind to top up currently.

Ian.

[Dod101]

This is the HYP Board and so HSBC qualifies but I would expect the price to drift around £7.00/£7.20 for the foreseeable future and so more or less maintain its current yield. I am sure they are still paying out more than they are earning.

Dod

[Dod101]

I just dumped all mine.

That's the easy bit. What are you going to buy instead? Unless the price has ticked up you have not got a very good price?

Dod

[monabri]

Isn't a part of the increased operating expenses as a result of investment to facilitate growth in China ( and ' in digital')?

Timing might not be ideal from a short term viewpoint ( Trump & China at loggerheads) but they're taking a longer outlook and ( IMHO) a sensible move.

I'm a little bit more optimistic than some for HSBA. It's not bad 'treacle' and maybe there'll be jam tomorrow?

Buy/Sell/hold - doesn't It depend on what you are trying to achieve with your portfolio and what the other holdings are doing and, to an extent, where you are in retirement?

[Dod101]

I am not being unduly pessimistic at least not in the longer term but as a very long term holder it has been jam tomorrow for a very long time now (for most of the last decade!)

As ap8889 notes, the capital value of the shares have come up quite well in the last 18 months or so and I think that was probably in anticipation of a dividend increase, or maybe just stabilisation of the business which they have now achieved. Anyway it is now up to the new Chairman and the new CEO to get motoring.

Dod

[melonfool]

Moderator Message:
Please try to stick to discussing shares within the HYP principles. Talking about them being a % up and 'taking money off the table' is not HYP. Thanks. Mel

[idpickering]

I just dumped all mine.

With respect, not a very HYP move IMHO. A knee-jerk reaction is maybe not a wise long term move. However, you are allowed to run your HYP as you see fit, and I suppose it might help you sleep at night having done so. I'm intrigued as to the full content of your post, which has been mod'd out, so would you like to explain your selling out please?

Ian.

Moderator Message:
There wasn't anything else in the post, that was why I put the comment. The explanation is about three posts down, but this is off-topic for HYP so please do not expand this or I will remove posts. Mel

[Wizard]

Don't most people look for an HYP selection to have a history of a growing dividend. This is not for the sake of the historical fact itself, but rather as an indicator of a likelihood of future dividend growth. As HSBC has explicitly stated the dividend will not increase for the foreseeable future I would not have thought HSBA qualifies as an HYP pick for new money (new share or top up). Only really a share for discussion by those with existing holdings from now on IMHO.

Terry.

[idpickering]

Don't most people look for an HYP selection to have a history of a growing dividend. This is not for the sake of the historical fact itself, but rather as an indicator of a likelihood of future dividend growth. As HSBC has explicitly stated the dividend will not increase for the foreseeable future I would not have thought HSBA qualifies as an HYP pick for new money (new share or top up). Only really a share for discussion by those with existing holdings from now on IMHO.

Terry.

You are correct Terry, regarding a growing dividend being the norm with all of ones HYP holdings, and even more so when investigating a new purchase, or top up. I agree with your comments, and stated earlier that I was of no mind to top up my HSBC holdings, for the reasons you state.

Ian.

[Dod101]

The trouble with seeking only shares with a growing dividend is that of course one does not know that there will be a growing dividend. What we do know is that HSBC will not be growing its dividend in the near future. Many of the big payers (Shell, HSBC and the two pharmas to name but four) are not currently growing their dividend. That I agree is disappointing and for anyone living off their dividends all the more so. It suggests that there might be something in the idea of going for a lower yielder but that is growing its dividend well. Which would fulfil these conditions? A share like Unilever say? And yet it apparently is not a HYP candidate either.

Moderator Message:
Questioning MOD removed. In future any post that mentions possible mod action may have the whole post deleted rather then edited. Raptor.

Dod

[Gengulphus]

Don't most people look for an HYP selection to have a history of a growing dividend. This is not for the sake of the historical fact itself, but rather as an indicator of a likelihood of future dividend growth. As HSBC has explicitly stated the dividend will not increase for the foreseeable future I would not have thought HSBA qualifies as an HYP pick for new money (new share or top up). Only really a share for discussion by those with existing holdings from now on IMHO.

And those who don't require their HYP selections to have histories of growing dividends, or use a less stringent criterion than that the dividend has increased each and every year. I'm one of the latter - I don't mind a company holding its dividend for a few years, provided its yield is decently high and I can see by other measures (e.g. increasing dividend cover) that it's on track to resume dividend growth. In HSBC's case, at least on a quick look, I think it is - dividend growth might be some way off, but profits have been generally heading in the right direction since 2016.

And there is the question of just how long the "foreseeable future" is. Personally, I reckon no more than five years for companies in even the most stable of industries (*) - and banking is hardly that!

(*) Note that's about the foreseeable fortunes of the companies - the industry as a whole may well have a much longer foreseeable future.

Gengulphus

[idpickering]

The trouble with seeking only shares with a growing dividend is that of course one does not know that there will be a growing dividend. What we do know is that HSBC will not be growing its dividend in the near future. Many of the big payers (Shell, HSBC and the two pharmas to name but four) are not currently growing their dividend. That I agree is disappointing and for anyone living off their dividends all the more so. It suggests that there might be something in the idea of going for a lower yielder but that is growing its dividend well. Which would fulfil these conditions? A share like Unilever say? And yet it apparently is not a HYP candidate either.

Dod

I do get where you're coming from with this Dod. OK, nothing is certain in this investing lark, but we do try to buy a rising dividend if we can. I hold all four of the shares you mentioned there, and I have given them some slack, and much like your comment regarding HSBC, they're almost bond like. I suppose it's a blessing to know that HSBC are at least maintain the dividend, and are being up front about it. Keep your agreeable, and informative posts coming Dod. You're a valued member of the team, and I'm sure I'm not alone in saying that.

Ian.

[kempiejon]

Don't most people look for an HYP selection to have a history of a growing dividend. This is not for the sake of the historical fact itself, but rather as an indicator of a likelihood of future dividend growth. As HSBC has explicitly stated the dividend will not increase for the foreseeable future I would not have thought HSBA qualifies as an HYP pick for new money (new share or top up). Only really a share for discussion by those with existing holdings from now on IMHO.

Terry.

I took TATE off my top up list when they stated they were going to hold the dividend, it was static for 3 years but I have now allowed it back in as the annual dividend has edged up and I see the yield at 4.5% is just about big enough for me but there are higher options available. I think other HYPers were topping up or considering topping up in those lean times, for example if as Gengulphus said if their is a reasonable expectation of future increases and the hold is for good reasons.

[miner1000]

As someone who had some exposure to the way banking works until a few years ago, I would expect most HYPers to hold a banking share in their portfolio. The banks have been hit hard with low interest rates and insurance selling penalties for years now and Barclays is still under investigation. However, in normal times banking is a very profitable business and returns on capital of 15-25% were the norm until relatively recently.

Despite the perceived problems of costs, low interest rates and Brexit, large banks are currently profitable (even RBS) and there are many candidates, including HSBC, that are paying a good dividend and some offer dividends that are forecast to rise in the forseable future. Brexit is clearly seen as a serious potential drag on share prices and potential profitability, however, the uncertainty will not last forever and banking is unlikely to go out of fashion any time soon.

Personally, I favour Lloyds because it has really gotten its cost income ratio down (to less than 50% which is quite outstanding), the yield is good and the divi is forecast to increase next year. I worked with Barclays and they could never get cost:income anywhere near 50% and HSBC are clearly struggling with their costs.

On the other hand HSBC offer the Asian diversification if Brexit is too much of a concern, and as others have said, the divi is healthy and likely to be safe long term. Barclays has the investment banking arm which could be a future money spinner. If you are serious about HYP, a banking share is almost a must have. Dumping the lot would not be my way of progressing an investment portfolio.

Just my thoughts,

Miner

[Dod101]

I agree with Genguplphus re HSBC. Their problem is that they have been hit with so many regulation issues as a result of legacy issues that they have found it impossible to cover their dividend with current earnings and they are not their yet. Their great attraction is though that they have a large exposure to the Pearl River delta and they are very big in trade finance, both areas which are highly profitable. With a current yield of over 5% I will not be selling and yet I need a share like Unilever where the dividends are growing at well over 5% each year. With the former we cannot expect much capital growth and with the latter we should be able to. So for total return (which is what we are surely concerned about as well as pure income) who can say which is the better bet?

To miner I would say that Lloyds' almost 100% exposure to the UK is the one drawback, otherwise it is now coming into my sights.

Dod

[CryptoPlankton]

So for total return (which is what we are surely concerned about as well as pure income)...

Dod

You can't resist being provocative, can you?

Seriously though, the investments I have in the "HYP" part of my portfolio are intended to stay there generating income until the day I pop my clogs - so whether they make a paper capital gain or loss is genuinely of no concern to me. The portfolio provides more income than an annuity would have with the same outlay and, however well or poorly it performs, it will contribute considerably more than zero to my estate. As long as it keeps the (hopefully growing) dividends coming, I am content. That is, in essence, what I understand to be the whole point of a HYP - it is for me, anyway.

(Of course, I do worry about TR when it comes to some other investments, but they have a completely different purpose...)

[Gengulphus]

I took TATE off my top up list when they stated they were going to hold the dividend, it was static for 3 years but I have now allowed it back in as the annual dividend has edged up and I see the yield at 4.5% is just about big enough for me but there are higher options available. I think other HYPers were topping up or considering topping up in those lean times, for example if as Gengulphus said if their is a reasonable expectation of future increases and the hold is for good reasons.

Yes, Tate & Lyle is an excellent example of the sort of growing dividend history I was talking about - https://www.dividenddata.co.uk/dividend ... ?epic=tate shows it very nicely in chart form. Ignoring 2000 and 2001 because the footnotes indicate some messiness to do with a change of financial year end and I don't want to bother checking out exactly what happened, it shows what I think will generally be perceived as a growing dividend history since 2002 - only slowly growing, with the overall increase from 17.8p in 2002 to 28.7p in 2018, which is a CAGR fractionally over 3%. Not by any means the fastest of dividend growers, but RPI inflation over the same period averaged fractionally under 3%, so it's very marginally inflation-beating growth.

It does however have dividend holds in 2002, 2010, 2016 and 2017, so the periods during which it's qualified as having 5 years of history showing a strictly increasing dividend (so the last 4 year-on-year dividend changes have been increases - the criterion used by pyad when he originally selected HYP1) are quite limited: 2006 to 2009, 2014 and 2015. A look at a long-term share price chart says that 2006 was a pretty poor time to buy; 2007, 2008 and 2009 increasingly good, ending with 2009 being very good; 2014 rather mediocre; and 2015 reasonably good. Overall, I'm pretty certain purchases in those years didn't average very much better than purchases outside them, and I'm rather doubtful that they averaged better at all.

So in short, the holds in Tate & Lyle's dividend history break its history of dividend increases in the strict sense, but I don't think that requiring such a history would have increased its value as a HYP share significantly. Which doesn't mean that dividend holds shouldn't be worried about at all - plenty of companies have held their dividends because they looked unsustainable but they didn't want to give up on the hope (rather than expectation) that things would improve in time to avoid a dividend cut, and that hope was dashed. And I can completely understand a HYPer deciding that distinguishing between a hope and an expectation of resuming dividend growth is too hard a problem for them and they'll forego the possibilities of buying shares like Tate & Lyle in 2010 for the sake of also forgoing the possibilities of buying shares like Tesco in 2013... But for the HYPer who is willing to take a deeper look at the company's prospects of future dividend growth, I don't think a dividend hold should rule a share out of consideration for purchasing.

Gengulphus