HSBC also warned on Tuesday that its business could be affected by continued US-China tensions, including conflicts around Hong Kong, strategic Chinese industries and human rights claims.

In the first quarter, the lender’s pre-tax profit was US$5.8 billion, beating a consensus estimate of US$3.34 billion by analysts compiled by the bank, and a significant improvement over the US$3.23 billion it reported a year earlier. On a net basis, HSBC earned a profit of US$3.9 billion in the first quarter, compared with a profit of US$1.79 billion a year ago.

Revenue declined 5 per cent to US$13 billion in the first three months of the year, while net interest income fell 14 per cent to US$6.5 billion.

Net interest margin (NIM), an important measure of profitability, slipped 33 basis points to 1.21 per cent from 1.54 per cent in last year’s first quarter. It was 1.22 per cent in the fourth quarter.

“This is a strong start of the year,” Citigroup analyst Ronit Ghose said in a research note.

In the first quarter, the bank released US$435 million in reserves set aside for soured loans. HSBC earmarked US$3.03 billion in provisions for expected credit losses (ECL) in last year’s first quarter and US$8.8 billion for all of 2020 as the coronavirus pandemic weighed on economic activity globally.

Lower credit charges could result in the bank’s earnings “normalising” a year ahead of forecasts, according to Morgan Stanley analyst Nick Lord said.

“The ECL release was across all global business and reflected an improvement in the economic outlook, especially in the UK,” said Lord.

The bank’s shares rose 2 per cent to close at HK$46 in Hong Kong on Tuesday.

HSBC is the first of Hong Kong’s three currency-issuing lenders to report their results and a bellwether for the city’s banks. Standard Chartered and Bank of China (Hong Kong) are scheduled to report their first-quarter results on Thursday, alongside many of the city’s other big lenders.

The results came as the bank prepares to move four senior executives to Hong Kong from London as part of its greater pivot to Asia.

The global heads for HSBC’s commercial bank and wealth and personal banking businesses, as well as the co-head of its global banking and markets segment, will now sit in Hong Kong, a first since the bank moved its headquarters to London nearly three decades ago. Nicolas Moreau, the head of asset management, also is set to shift to Asia later this year.

The moves, however, have stirred up discontent among some rank-and-file employees in Hong Kong. They have questioned the expense of moving the executives and their families to Asia and whether their presence in the region will lead to more business, according to a person familiar with the matter.

“The feedback that I’m getting is people are pleased with the increased focus on growth in Hong Kong and in Asia, in particular,” Quinn said.

In Hong Kong, pre-tax profit dropped by 34 per cent to US$1.89 billion, compared with US$2.85 billion a year ago.

The Hong Kong business has been “unduly impacted” by the decline in interest rates in the past year, but should begin to see a recovery in interest income this year, according to Ewen Stevenson, HSBC’s chief financial officer.

The city, HSBC’s largest market, saw its economy contract by 6.1 per cent last year, its sharpest annual drop on record. Hong Kong’s government forecast the economy will grow by 3.5 per cent to 5.5 per cent in 2021.

Pre-tax profit increased about 1 per cent in its Asia business, while its UK ring-fenced bank reported a pre-tax profit of US$1.08 billion, nearly triple its pre-tax profit a year ago and more than it made in all of 2020.

Pre-tax profit in the bank’s global banking and markets segment soared 74 per cent to US$1.83 billion in the first quarter. In HSBC’s wealth and personal banking segment, pre-tax profit more than doubled to US$1.85 billion in the three months ended March 31.

The commercial bank’s pre-tax profit nearly tripled to US$1.82 billion in the quarter.

Additional reporting by Alison Tudor-Ackroyd