By
Mayowa Adebajo
March 27th, 2024
According to its third-quarter report, HSBC says it will buy back $2 billion worth of its shares after scaling 75% in profit.
On Monday, leading British bank HSBC Holdings Plc (NYSE: HSBC) reported its Q3 earnings, which saw a 75.8% increase in pre-tax profit to $5.4 billion from the same period a year ago. This far surpassed the expectations set by analysts, which was a pre-tax profit of 22.8% or $3.776 billion. In light of this positive development, HSBC now plans to buy back about $2 billion of its shares.
HSBC’s Q3 report did not seem to be impacted by pandemic-related bad loans and an underperforming property market in China – its key market. The multinational investment bank said it released $700 million in cash previously set aside to address some of the aforementioned concerns. According to HSBC, that helped to spur its improved earnings in addition to ensuring region-profitability for all bank branches. HSBC CFO Ewen Stevenson intimated to Reuters:
“You should also look at the buyback as a measure of the confidence that we have at the moment that we are not unduly concerned about our exposures in China.”
HSBC Q3 Profit Report by the Numbers
HSBC’s shares in Hong Kong jumped 1% when trading resumed after the lunch break. In addition, the leading British bank revealed that it loaned $19.6 billion to China’s beleaguered property sector. Reported HSBC third-quarter revenue stood at $12 billion – a 0.7% increase, just shy of analysts’ projections of $12.3 billion or 3.1%. Furthermore, the net interest margin was 1.19% compared with 1.2% for the second quarter. The common equity tier 1 ratio was 15.9% compared with 15.6% from Q2. Finally, HSBC’s basic earnings per share was 18 cents, compared with 2020’s 17 cents and 7 cents from Q2 and Q3, respectively.
HSBC CEO Noel Quinn weighed in on the latest company release for the last quarter ended. He said:
“While we retain a cautious outlook on the external risk environment, we believe that the lows of recent quarters are behind us.”
Quinn, who officially assumed the role in 2020 just before the pandemic-induced economic crisis, believes Asia can drive growth. He has channeled a chunk of HSBC’s resources and manpower into what he sees as a lucrative wealth business. Furthermore, the bank could spend up to $1.5 billion more on acquisitions in that space after acquiring AXA’s Singapore assets. According to CFO Stevenson, the deal – back in August, cost HSBC about $575 million.
$2 Billion Share Buyback
Although HSBC did not disclose dividends for the third quarter, the bank is planning a $2 billion share buyback. In addition, Stevenson said the bank’s capital position is very stable. As a result, HSBC is looking to reduce its capital ratio to between 14% and 14.5% by the end of next year. Stevenson says the planned share buyback is the primary motivating factor to giving up some “excess capital.”
Up until last year, HSBC was Europe’s highest-ranked biggest lender by assets. However, BNP Paribas, a prominent French banking group and direct rival to HSBC, claimed the title last year. The latter has $3 trillion in assets.