HSBC’s outgoing chief executive has declared “the worst is behind us” on China’s property crisis as the bank handed shareholders a $3bn (£2.3bn) dividend.
Noel Quinn, who oversaw the fallout from China’s property crash, said risks from the subprime crisis had lessened after it set aside $300m to cover losses on China property portfolio, down from $1bn last year.
However, the value of its commercial real estate property portfolio for mainland China stood at $9.4bn in July, compared to $12.1bn a year ago.
Pre-tax profits for the six months dipped slightly to $21.5bn from $21.6bn last year and revenues nudged up to $37.2bn from $36.8bn.
Financial strain on HSBC, which is the largest non-Chinese bank in the country, intensified amid the country’s property crisis but Mr Quinn said there were signs of improvement across the market.
Mr Quinn is to step down in September and be replaced by finance chief Georges Elhedery, who will become the bank’s first Mandarin-speaking chief executive.
Mr Quinn said: “The real estate market in China has still got a journey to go through but I say the worst is behind us.
“We feel we are well provisioned but it will take a while for the full workout of that sector to come to fruition.”
HSBC has been criticised over its ties to China, its biggest market, with MPs attacking the lender after it shut down accounts linked to pro-democracy campaigners in Hong Kong last year.
The bank has been forced to walk a political tightrope as tensions between West and China have ramped up in recent years.
Beijing spent years urging property developers to accelerate building of homes and offices but slower economic growth and a slump on demand left banks exposed to billions of unpaid loans.
Evergrande, one of China’s biggest property developers, was forced into liquidation earlier this year after racking up $328bn of debts.
Results for the six months ending June 2024 show HSBC’s Hong Kong property book shrunk in size from $6.3bn to $4.8bn from the start of the year, in a sign it was reducing its level of risk.
Mr Elhedery said the reduction was owing to $1bn of loan repayments from customers and $500m of write-offs.
He remained bullish on the prospects for the Asian powerhouse and said the “big challenges” from property were behind the bank.
He said: “We recognize the Chinese economy is undergoing a certain transformation, it’s shifting from the previous economic development model, heavily reliant on infrastructure on lead estate on exports, into a more modern economic model that’s more reliant on higher end manufacturing, sustainability and on consumer driven GDP growth.
“We’re very confident that these are good prospects for the Chinese economy in the medium to long term.”
HSBC named Jon Bingham as interim finance chief to replace Mr Elhedery.