HSBC shares rise on $3 billion buyback; flat first-half profit beats estimates

HSBC Holdings pledged to buy back $3 billion in shares on Wednesday, in a fresh attempt to boost a flagging stock price, after reporting stable first-half profit on growth in wealth management and narrowing loss in Chinese real estate, Reuters reported.

Europe’s largest bank also set out a new goal for its return on average tangible equity – a key performance target – to be in the mid-teens in 2025, matching its estimate for 2024.

The earnings beat market expectations and the new return target should give investors confidence, Jefferies analyst Joe Dickerson said.

HSBC, which is due to welcome its new CEO Georges Elhedery in September following the retirement of Noel Quinn, said it was making progress with ambitions to grow fee-based income to offset falling revenue from lending, with several major central banks seen likely to cut interest rates later this year.

“We are confident that we have the right strategy and model to grow revenue, even in a lower interest rate environment,” Quinn said in a statement.

The Asia-focused bank said it will pay an interim dividend of 10 cents a share, the second payment of 2024 following 31 cents announced last quarter.

The $3 billion buyback followed a $5 billion buyback announced earlier this year, and means the bank will have paid $36 billion in dividends and $18 billion in share buybacks to shareholders over Quinn’s tenure as CEO.

HSBC’s Hong Kong-listed shares rose more than 3% after the earnings announcement.

For the first six months this year, HSBC said pretax profit fell 0.4% to $21.6 billion but was better than the $20.5 billion average of broker estimates compiled by HSBC.

Wealth revenue reached $4.3 billion for January-June, 12% more than the same period of 2023, driven by increased investment distribution and private banking income, as well as growth in asset management and life insurance.

NEW CLIENTS SURGE, CHINA LOSS NARROWS

The lender highlighted its commitment to its core London and Hong Kong markets, pointing out an 8% rise in international customer numbers to 2.7 million in January-June, with 345,000 new-to-bank account openings in Hong Kong.

It also saw signs of relief from a slowing economy and worsening property sector in China, after booking a $3 billion writedown on the market last year.

Revenue at the lender’s Global Banking and Markets investment banking unit grew 5%, as HSBC benefited from an upswing in its equities business, in line with trends at rival banks.

Overall, in minor tweaks to guidance, HSBC estimated credit loss would fall into a 30 to 40 basis point range for the full year, from around 40 basis points a year prior.

It also upgraded its net interest income view to around $43 billion from at least $41 billion.

Operating expenses increased around 5% on year to $16.3 billion in the first half due to increased spending on technology, inflationary pressure and change in the timing of bonus payments.

The bank also named Jonathan Bingham as interim group chief financial officer, effective Sept. 2.

Bingham, who joined the bank in 2020 after 20 years at accounting firm KPMG, will retain his existing duties as global financial controller, HSBC said, as it continues the process of identifying a permanent CFO.