HSBC announces $2bn buyback after strong profit beat

HSBC will buy back as much as $2 billion (€1.82 billion) of stock as the Asia-focused lender announced a fresh plan to return money to shareholders after reporting first-quarter results that beat estimates. The London-headquartered bank will also resume paying quarterly dividends for the first time since 2019, stepping up capital returns as it faces mounting pressure from one of its largest investors to boost profitability.

Pretax profit tripled to $12.89 billion (€11.73 billion), beating an estimate of $8.64 billion (€7.86 billion). The jump was partially driven by a reversal of an impairment linked to the delayed sale of its French retail arm and the booking of a gain from its purchase of Silicon Valley Bank’s (SVB’s) UK business.

“With the good momentum we have in our business, we expect to have substantial future distribution capacity for dividends and share buy-backs,” chief executive Noel Quinn said in its first-quarter earnings statement. “We remain focused on continuing to improve our performance and maintaining tight cost discipline.”

HSBC, like its Wall Street and European peers, has seen a recovery in earnings on the back of higher interest rates. As the biggest bank in Hong Kong, the lender is also expected to benefit from increased wealth flows after China dropped its strict pursuit of Covid zero.

HSBC is in the midst of a pivot to Asia while shedding unprofitable businesses in North America and Europe. It posted an 82 per cent jump in wealth and personal banking revenue for the quarter, while commercial banking income doubled.

However, the lender said last month that rising interest rates have put a deal to sell its French retail banking business into question, a potential blow to its plans to sharpen its global operations. The delay caused the reversal of a $2 billion impairment. HSBC also flagged that it would now seek to complete the sale of its Canadian operations by the first quarter of next year. It took over the UK operations of SVB for £1 (€1.14) this year, shortly after the failure of the California-based bank.

The results come at a pivotal time for HSBC as its directors prepare to face investors at the bank’s annual meeting later this week. On the agenda for the AGM are two investor-proposed resolutions that would force the bank to report regularly on its Asian business, as well as requiring it to lift its dividend to its pre-pandemic level. The bank’s board has recommended that shareholders vote against the resolutions.

In recent months HSBC and top shareholder Ping An Insurance have fought an increasingly fraught battle over the bank’s future as the Chinese insurer has repeatedly called for the company to consider a spin off of its Asian unit. HSBC has dismissed the plan as expensive, risky and likely to destroy shareholder value.

HSBC said last month that it had held about 20 high-level meetings with Ping An in the past year to discuss the proposals but that it remained unconvinced by its arguments. Ping An has responded saying that the bank has failed to respect the concerns and views of its investors.

– Bloomberg