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HSBC to keep dividend powder dry even with strong first quarter

First quarter trading boosted by an upturn in financial markets sparked by Donald Trump’s election.
picture of HSBC building
HSBC currently has the highest prospective yield of the big UK banks

HSBC PLC’s (LON:HSBA) posted better than expected first quarter numbers but shareholders are not likely to see any immediate benefit.

Iain Mackay, head of finance, said that it would hold dividends steady for now while he also ruled out a share buy-back soon following completion of a US$1bn purchase last month and US$2.5bn a year ago.

Even if, as chief executive Stuart Gulliver said, the bank ‘pauses for breath’ in its returns to shareholders HSBC still pays the highest prospective yield currently of all of the large banks at around 6%.

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Analysts added its capital position was better than expected with first quarter trading boosted by an upturn in financial markets sparked by Donald Trump’s election.

Underlying profits rose by 12% after what Gulliver described as a great quarter for its global banking business.

Asia was also strong, with life insurance sales rising 13%.

Profits before impairments rose 12% to US$5.94bn in the three months to March, although after taking US$1.2bn of adjustments on its loan book statutory profits fell 19% to US$5bn.

Stated revenues were also hit by adverse currency movements and the absence of the now sold Brazil business, though they rose by an adjusted 3% due to the good performance in wealth management in Asia as well as in global banking.

All four of HSBC's global businesses performed strongly

Gulliver said three of its four global businesses had performed strongly.

“Commercial Banking delivered higher revenue from our liquidity and cash management activities; and Retail Banking and Wealth Management was supported by rising interest rates and renewed customer investment appetite.”

Global markets revenues rose 29% to US$1.9bn, while retail banking and wealth management saw a 15% rise to US$5bn.

Gulliver is due to leave in 2018 following chairman Douglas Flint who departs in October to be replaced by AIA Group chairman Mark Tucker, who has been charged with finding a new chief executive.

HSBC like other UK banks has been dogged by scandals and mis-selling costs and this time it set aside another US$210mln for payment protection insurance (PPI) claims.

A deadline of August 2019 has been set as a cut-off for new claims and Mackay said he hoped this latest provision was the last the bank would see in respect of PPI.

Shares rose 3.3% to 667p, making it one of the best FTSE 100 performers on the day.

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