HSBC to raise dividends in show of capital strength

Mon Mar 4, 2013 3:14pm EST
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By Steve Slater and Matt Scuffham

LONDON (Reuters) - HSBC (HSBA.L: Quote) plans to increase dividends this year in a show of strength over rivals even though the bank's annual profits fell after a money-laundering fine and compensation paid to customers.

Europe's biggest bank is in the last year of a three-year restructuring under Chief Executive Stuart Gulliver, where it has closed or sold 47 businesses and cut 38,000 jobs.

The bank said this had cut costs and risks and re-established its capital advantage over rivals, opening the door for higher dividends.

"Over the last three or four years we've slipped back into the pack and now we're re-establishing the clear water between HSBC and other banks in terms of being incredibly well capitalized," Gulliver said.

Already one of the highest dividend payers among Britain's blue-chip companies, HSBC will bump up its first three interim payouts on 2013 earnings by 11 percent to 10 cents per share, after lifting its 2012 dividend by 10 percent, paying out $8.3 billion.

But a weak global economy and increased cost of regulation imposed since the financial crisis has made Gulliver's other main task of improving profitability more difficult.

HSBC's 2012 pretax profit fell 6 percent to $20.6 billion, below the average forecast of $22.7 billion from 28 analysts polled by Reuters. That put it just behind J.P. Morgan (JPM.N: Quote), the top earning bank outside of China. HSBC's underlying profits rose 18 percent to $16.4 billion.

Banks around the world have had to adapt to much stricter regulations after the crisis, making it tough to produce the high returns the industry had grown used to.   Continued...

A HSBC logo is seen above the entrance to a HSBC bank branch in midtown Manhattan in New York City, December 11, 2012. REUTERS/Mike Segar