HSBC to buy back $2b shares

HSBC Holdings PLC on Monday said profit rose 5 percent in the first half of 2017
HSBC Holdings PLC on Monday said profit rose 5 percent in the first half of 2017
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01 August, 2017

The Asia-focused lender also unveiled plans for a $2-billion share buyback in the second half of the year.

Net profit for the first half of the year rose 10% to $6.99bn from $6.36bn for the same period in 2016.

Adjusted revenue and pre-tax profit rose 4 per cent and 13 per cent respectively, beating analysts' estimates, as the bank continued to pump capital into better-returning markets in Asia and earnings at the investment bank surged. Revenue for the first half was marked at $26.2 billion, the bank said, down 11% from a year ago " primarily due to currency translation differences, the absence of fair value movements on our own debt and revenue from the operations in Brazil that we sold", HSBC said. "The revenue we think is at risk from Brexit is about $1 billion, but we don't expect to lose it" because moving staff will protect those businesses affected.

The latest share buyback, of up to $2bn, comes as HSBC uses excess capital to offset the dilutive effect of shares paid out as dividends. Chairman Douglas Flint is also leaving, to be replaced by Mark Tucker in October.

Stuart Gulliver, chief executive of the HSBC Group, described the results as "excellent". Subsequently, the group is growing market share in numerous products that are central to its strategy.

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Banks analyst Robert James, who works for Old Mutual Global Investors, said that the key to the investment case for HSBC shares is the $400bn (£304bn) surplus of deposits over liabilities held by the company.

Since the 2008 credit crunch HSBC has cut thousands of roles and sold assets to ensure it can keep paying dividends and remain profitable.

The cost-cutting drive appears to be paying off, with operating expenses falling 12% to $16.4bn in the first half of the year, largely thanks to the bank's sale of its operations in Brazil.

HSBC pulled capital from its U.S. business earlier this year for the first time in more than a decade. At the 2015 strategy day, Mr. Gulliver laid out an aim to get revenue growth in its worldwide network above GDP, and said he tracks the estimated figure every two weeks.

The announcement, which brings the total stock it has pledged to buy back in the past year to $5.5bn, came in a positive set of interim results from the banking group, City AM reports.


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