Date: 2025-02-05 Page is: DBtxt003.php txt00025783 | |||||||||
BANKING
HSBC HSBC Plans $3 Billion Buyback, CEO Touts Capital Strength Original article: https://www.bloomberg.com/news/articles/2023-10-30/hsbc-announces-3-billion-share-buyback-after-missing-estimates Peter Burgess COMMENTARY In some ways the numbers being discussed in this article are huge, but relative to the actual size of the bank, the numbers are quite reasonable. Though HSBC is a 'London' bank ... that is incorporated in the UK with a London Head Office, its business is global, and especially with a focus on Asia. China on its own has a population of around 1.4 billion people which compared to the UK population of around 60 million is about 24 times as many! Through this lens the idea that HSBC has done a stock buyback $3 billion is not quite so amazing! But, that aside, the scale of the world's big banks is very bothersome. It is well nigh impossible for most members of the general public to understand what is going on with these big banks, and even 'experts' are unlikely to know very much of the totality. In reality, big companies now have more power and influence than most countries. This could be a good thing, because many countries are governed very badly with questinable goals and rather little that is positive for ordinary people ... but big powerful and financially successful companies also have rather questionable goals when it comes to ordinary people who are by far the majority in any country. Worse ... the accounting and reporting required by big corporate organizations including banks is nut much 'fit-for-purpose' in the 21st century. A big part of the design of accounting and reporting goes back to the Victorian era with a focus on ensuring that 'investors' are treated fairly which was very much needed at that time. But that was more than about a hundred and fifty years ago and much more reporting is needed in these times, especially the corporate impact on society at large and the environment. Most companies are now doing some reporting related to society and the environment but it is most often not integrated in an effective way into the overall reporting of the organization which more than anything else remains focused on the company's profit performance relative to shareholders! Bloomberg is a massive global communicator about corporate performance and fits the pattern just described ... investors are much important than the broader society and most environmental matters are more about impact on investors than the future of the world's sustainability. Peter Burgess | |||||||||
HSBC Plans $3 Billion Buyback, CEO Touts Capital Strength
October 30, 2023 at 12:16 AM EDT ... Updated on October 30, 2023 at 7:08 AM EDT HSBC Holdings Plc announced a fresh buyback program and hinted at the potential for further returns to investors despite announcing profits for the third-quarter that missed market expectations. The London-headquartered bank said that it would shortly begin buying back an additional $3 billion of its shares, taking total stock repurchases for the year to $7 billion. HSBC Chief Executive Officer Noel Quinn signaled there may be more to come. “We’ve got very strong capital generation at the moment,” Quinn said, speaking in an interview Monday with Bloomberg Television. “We’re in a good position to reward our shareholders for their patience and loyalty over the past few years.” Pretax profit of $7.7 billion for the three months through September fell short of the $8.1 billion estimated by analysts tracked by the company. Quinn said that was in part due to a $600 million charge in relation to its hedging strategy, which would benefit the bank in subsequent quarters. Operating expenses were up 2% from the same period a year earlier. This was in part due to a planned $300 million increase in performance pay for some staff, as well as the impact of higher technology spending. HSBC said it now expected cost growth of about 4% for 2023, up from its previous target of about 3%. HSBC shares were little changed on Monday in London. The British bank, which generates most of its income in Asia, has been deploying more resources in the region to tap into faster-growing markets and saw a “good wealth performance,” particularly in Hong Kong, it said. HSBC agreed to buy Citigroup Inc’s retail wealth management portfolio in mainland China this month, adding about $3.6 billion in assets and deposits from wealth customers across 11 major cities. However, sputtering growth in China and an unfolding real estate meltdown have posed a challenge to many businesses seeking to expand in the world’s second-largest economy. The bank’s loan loss provision was an expected $1.1 billion for the quarter, with half of that linked to China’s commercial real estate sector. Quinn said the Chinese property market had experienced a “huge policy correction,” but added that the prices have reached a trough. “I think we are at the bottom of the market, but it will take quite a while for that market to recover and regain momentum,” he said on Bloomberg Television. “I’m not expecting a massive reversal in that sector in the next 12 months or so, but I do expect it to be a gradual improvement from where we are.” HSBC is one of the biggest international banks operating in the Middle East and said that its strategy for the region remained unchanged despite the Israel-Hamas war, which threatens to erupt into a wider conflict. Chief Financial Officer Georges Elhedery said the bank was supporting its staff and clients impacted by the conflict. The lender kept a target of mid-teens growth in its return on tangible equity, while it expects net interest income of more than $35 billion this year. Its outlook for expected credit losses was also unchanged. What Bloomberg Intelligence Says HSBC’s additional share buybacks of as much as $3 billion bring this year’s total to $7 billion, and even though 3Q pretax profit missed consensus by about 5%, the announcement underpins strong medium-term profitability with 2023-24 midteens return on tangible equity guidance reiterated. As much as $200 million of Chinese property loan-loss provisions shouldn’t derail the targeted 40-bp cost of risk in 2023. Raised (100-bp) cost-growth guidance to 4% is driven by higher technology spending, with a $35 billion-plus net interest income target still looking conservative to us. Tomasz Noetzel, BI analyst Across HSBC’s businesses, there was a mixed picture. In its wealth and personal banking unit, the lender said that a $2 billion rise in customer lending had been driven by growth in Hong Kong and UK mortgages, offset by deleveraging in its private banking arm. In commercial banking, there was a fall in loan demand among its clients leading to a 5% year-on-year drop. However, in its global banking and markets division, which services HSBC’s largest corporate clients, the bank said that lower activity in Asia had been offset by higher demand for loans in Europe. Global banking and markets revenues rose 2% to $3.9 billion. A particular bright spot for the business were its global debt markets and securities financing units which both recorded double-digit year-on-year rises in revenues that helped negate the impact of falling earnings from foreign exchange and equities. As part of its Asia pivot strategy, HSBC has completed several bolt-on acquisitions in recent years, particularly in wealth management. Quinn said the bank was open to further deals. “I think it’s right to continue to build our capabilities via bolt-ons,” he said, speaking to Bloomberg Television. However, he said the bank was not looking to do bigger deals. Other highlights from HSBC’s third quarter include:
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