HSBC Holdings joined its British peers in releasing loan provisions that it booked in the early stages of the pandemic, boosting earnings that easily beat estimates.

Europe’s biggest lender said adjusted second-quarter profit doubled from a year earlier to $5.56bn, topping analysts’ estimates of $4.73bn. The London-based bank also cut back further on its bad debt provisions, saying the global economy is starting to emerge from the worst effects of the pandemic, according to a statement on Monday.

The improved credit outlook prompted the bank to pay an interim dividend of 7c a share, after the Bank of England removed curbs on cash payouts last month. The bank said it expects to meet its target of paying out 40%-55% of earnings in dividends this year.

In April, HSBC began to release credit provisions it had piled up in the early stages of the Covid-19 outbreak, saying the outlook for UK borrowers in particular was improving after more than a year of pandemic turmoil.

“We definitely feel more confident,” CFO Ewen Stevenson said on Bloomberg Television. “We will keep buybacks under review” together with dividends.

HSBC began a fresh restructuring this year that aims to refocus the bank on the Asian markets where it makes most of its money. The bank wants to manage more assets for the region’s wealthiest residents — a lucrative but highly competitive market. In May, HSBC sold 90 branches in the US, marking a retreat from mass-market banking in the country. Weeks later, the company completed the drawn-out disposal of its unprofitable French retail business.

“We have taken firm steps to define the future of our US and continental Europe businesses, and further enhanced our global wealth capabilities,” said CEO Noel Quinn in the statement.

HSBC joins rivals Barclays and Lloyds Banking Group over the past week in unwinding some of their preparations for a wave of bad loans during the pandemic. Banks have reported strengthening demand for home loans and low levels of impairments as Britons get back to work and leisure without restrictions.

HSBC is one of the biggest dividend payers in European banking, and after a year of restrictions is expected to set aside more than any of its rivals this year and next, according to estimates collated by Bloomberg Intelligence.

The bank posted higher costs on performance pay, even after it reduced headcount by 3,500 this year.

HSBC shares jumped 3.6% in early Hong Kong trading, and have gained 9.5% this year.

Bloomberg News. More stories like this are available on bloomberg.com


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