HSBC's $2bn share buyback fails to win over investors

06 May, 2018, 14:44 | Author: Kevin Carter
  • HSBC Plans $2 Billion Share Buyback as Profit Edges Down

The group meanwhile announced that it meant to initiate e a share buyback of up to $2 billion, while cautioning that it expects this to be the only share buyback for the current year, "in light of the growth opportunities that we now see". "We intend to deliver positive jaws [the ratio for how income growth exceeds expenses growth] for 2018".

Friday's results underwhelmed investors and HSBC shares fell 2.5 per cent in early London trading to 703.7p.

"The "bad" element was cost development where cost growth outstripped revenue growth", said Joseph Dickerson, banks analyst at Jefferies.

Return on equity for the bank fell compared with the same quarter previous year, from 8 per cent to 7.5 per cent. It came as HSBC announced first-quarter revenue and profit that largely matched analysts' expectations.

"This targeted spending contributed to a rise in adjusted costs in the first three months of the year", HSBC's group chief executive, John Flint, said in a statement.

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Signing off after a turbulent seven-year tenure, Mr Gulliver spent much of his time managing scandals and winding down businesses while trying to bring the bank back to revenue growth.

HSBC's common equity tier 1 ratio - a measure of financial strength - was 14.5 per cent at the end of March, flat compared with end-December and higher than 14.3 per cent in the first quarter of a year ago. Net profit declined 1.4 per cent to $3.09bn.

Hong Kong banking giant HSBC said yesterday that pre-tax profit dipped four per cent to USD4.76 billion in the first three months of the year owing to rising operating costs but added it would buy back Dollars two billion worth of stock. Higher bond yields improve the returns available from this capital.

It also said revenue rose six per cent to USD13.7 billion in the period as it benefits from an improving global economy and rising interest rates.

However a 13 per cent increase in operating expenses, "primarily reflecting investments to grow the business and enhance our digital capabilities, and the effects of currency translation", to $9.4bn, pushed pre-tax profit down four per cent to $4.8bb. "So, pretty happy with where we started off the year".

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