Europe’s largest lender HSBC on Wednesday declared a share buyback program of up to $3 billion, as pretax profit for the first half of the year as results beat expectations on the back of a high-interest rate environment. HSBC Holding announced a $3 billion share buyback and upgraded its income outlook on Wednesday, as the bank showed progress in its efforts to shield its business from global interest rate cuts that may hit lending revenue.
The bank posted pretax profit in the six months to June of $21.56 billion, down from $21.66 billion in the same period of last year.
HSBC’s earnings results
The first-half figure of pretax profit came in well above the $20.5 billion average of broker estimates compiled by HSBC, as per reports.
“We are growing and investing in our international retail and wealth business to sit alongside this, which is helping to diversify revenue,” HSBC’s outgoing CEO Noel Quinn said Wednesday.
“Each of these strengths contributed to a good revenue performance in the first half of 2024, supported by higher interest rates.”
The new return target and earnings that beat market expectations should give investors confidence, Jefferies analyst Joe Dickerson added.
HSBC’s revenue
HSBC’s revenue was up 1.1% year-on-year to $37.3 billion, in a performance HSBC attributed to the “impact of higher consumer activity in our Wealth products in Wealth and Personal Banking (‘WPB’), and in Equities and Securities Financing in Global Banking and Markets (‘GBM’).”
The lender’s wealth revenue picked up by 12% to $4.3 billion in the first six months to June, with noted growth in investment distribution, asset management and life insurance.
The bank outlined its priorities of diversifying its revenues and maintaining a firm foothold in what it described as its “critical” home markets of Hong Kong and the U.K. — it noted 345,000 new-to-bank customers opening accounts in the former region in the first half of the year, with international customers up 8% to 2.7 million in Britain over the same period.
HSBC approved dividend
The bank also approved a second interim dividend of $0.10 per share and announced a share buyback of up to $3 billion, which it said it expects to complete within three months.
“That takes our total distribution to shareholders in 18 months to over $34 billion,” HSBC’s Quinn told CNBC Wednesday. “And I think the standout performance is, I think, our ability to continue to grow revenue from alternative sources other than interest income.”
HSBC’s new goals
Europe’s biggest bank also set out a new goal for its return on average tangible equity – a key performance target – to be in the mid-teens in 2025, matching its estimate for 2024.
As HSBC is due to welcome new CEO Georges Elhedery in September following the retirement of Noel Quinn, said it had succeeded in reducing its sensitivity to rate cuts through an insurance strategy known as a structural hedge.
HSBC return on equity
HSBC’s CET1 capital ratio picked up to 15.0%, up by 0.2 percentage points compared with the Q4 of last year and above the lender’s guidance of its medium-term target range of 14% to 14.5% for the metric.
The bank also declared a return on average tangible equity excluding notable items of 17.0% over January-June, down from 18.5% in the same period of last year. HSBC provided new guidance of “mid-teens return on average tangible equity in 2025,” in line with its 2024 outlook.
“The strong performance of the business gives us the confidence to say that we’ll be mid-teens return in 2025 as well,” said Quinn. Addressing the broader outlook, he touched on the bank’s performance in the U.K., saying, “I think there are some encouraging signs in there for future economic growth, and there’s certainly a strong resilient economy at the moment.”
Stock update
HSBC share price which is London-listed picked up 3.12% at 08:42 a.m. London time, just after local markets opened, while Hong Kong-listed HSBC share price were up roughly 4.4%. This is as investors cheered its stable first-half profit growth, gains in wealth management income and narrowing losses in Chinese real estate.
