Pedestrians in protective masks walk past a logo displayed in an HSBC bank branch in the central district of Hong Kong.

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HSBC, Europe’s largest lender by asset, reported pre-tax profit for the first quarter that beat estimates but posted a decline in sales.

The London-headquartered bank, which generates most of its revenue in Asia, announced that reported profit before tax for the three months ended March 31 was up 79% year over year to $ 5.8 billion Estimates compiled by HSBC.

Reported sales were nearly $ 13 billion, down 5% in the first quarter from the same period last year. The bank said this reflected the low interest rate environment.

“We had a good start to the year to support our customers while delivering significantly improved returns for our shareholders,” said Noel Quinn, group chief executive at HSBC, in a statement. “I am satisfied with our sales and cost development, but especially with our significantly lower expected credit losses.”

“We have made further progress in reducing costs and risk-weighted assets, and introducing new products and features in areas of strength,” added Quinn.

According to HSBC, all regions were profitable in the first quarter.

Other highlights of the bank’s financial report:

  • Expected credit losses and other charges from credit impairments decreased in the quarter. The bank released bad debt provision of $ 400 million, compared to a $ 3 billion charge a year ago.
  • The net interest margin – a measure of the profitability of lending – was 1.21%, 33 basis points below the prior-year figure.
  • The core capital ratio was 15.9% and remained unchanged compared to December 31, 2020.
  • Basic earnings per share were $ 0.19, down from $ 0.03 in the previous quarter and $ 0.09 year over year.

outlook

HSBC said the economic outlook had improved and expected credit losses for 2021 would be “below the medium-term range of 30 to 40 basis points of average credit,” as stated in the 2020 annual results.

Mid-single-digit percentage growth in consumer credit is also expected for the year depending on how quickly countries can recover from the coronavirus pandemic and the length of government support measures.

The bank announced in February that it will not be paying quarterly dividends in 2021, but will instead consider making an interim payout for its half-year results in August. As of 2022, the bank is aiming for a payout ratio of between 40% and 55% of reported earnings per share, according to the latest earnings release.

Hong Kong-listed HSBC shares were up 0.44% ahead of earnings release.