Tuesday, 24 October, 2017

HSBC Tops First Half Estimates, Boosts Share Buyback Program by $2 Billion

HSBC's first-half profit rises 5 per cent, beating forecasts HSBC's first half 2017 pre-tax profit rises 5 per cent, announces USD 2 billion stock buyback
Juana Turner | 01 August, 2017, 22:53

Once completed, the latest buyback will take the total value of the bank's share buybacks since the second half of a year ago to $5.5bn.

Pretax profit reached $10.2 billion in the six months through June, from $9.7 billion in the same period a year earlier, HSBC said in a statement.

Reported pre-tax profit for the six months to June rose five percent to $10.2 billion compared with $9.7 billion for the same period past year.

Revenue fell $3.3 billion to $26.2 billion, which HSBC said was "primarily due to currency translation differences" along with "fair value movements" on the disposal of its Brazil operations.

The share buybacks have been used to offset the effect of shares being paid out as dividends. HSBC, like many global banks, spent the years up to the 2008 financial crisis building its empire.

The bank expects to complete the buyback by the end of 2017, taking the total amount of stock it has pledged to buy over the past year to US$5.5bn.

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.

"The return of capital comes from the fact that the business is very accretive, very profitable. the dividend is 51 cents for the foreseeable future", HSBC finance director Iain Mackay told Reuters.

HSBC's dividends totalled $10.1 billion in 2016, $10 billion in 2015 and $9.6 billion in 2014.

HSBC pulled capital from its USA business earlier this year for the first time in more than a decade.

HSBC described its overall performance as "excellent" after a turbulent two years, during which the bank stepped up its efforts to cut costs, by streamlining the business and slashing tens of thousands of jobs.

Laith Khalaf, senior analyst at Hargreaves Lansdown, said: "The market has reacted positively, mainly because it likes the smell of two billion United States dollars of cash heading back to investors from a share buy-back scheme taking place in the second half of this year". Former AIA Group chief executive Tucker, HSBC's first ever externally appointed chairman, is set to take up the role on 1 October. The brokerage raised its 2017-2020 earnings per share estimates by 4 percent to 5 percent.

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