HSBC Holdings Plc has recently announced a new share buyback program and hinted at the potential for additional returns to investors, despite its third-quarter profits falling below market expectations. The London-based bank has outlined several key developments.
HSBC plans to initiate a new share buyback program, with intentions to repurchase an additional $3 billion worth of its shares. This action will bring the total stock repurchases for the year to $7 billion, reflecting a commitment to returning capital to shareholders. CEO Noel Quinn underscored the bank’s robust capital generation and expressed the desire to reward its loyal shareholders for their patience over the years.
In the third quarter, HSBC reported a pre-tax profit of $7.7 billion, which fell short of the $8.1 billion estimated by analysts. This profit shortfall was attributed in part to a $600 million charge related to the bank’s hedging strategy.
Operating expenses for the bank increased by 2% in comparison to the same period in the previous year. This uptick was due to planned increases in performance pay for certain staff and higher spending on technology. HSBC has adjusted its cost growth projection for 2023 to around 4%, up from its earlier target of approximately 3%.
HSBC, which derives a significant portion of its income from the Asian market, reported a strong performance in wealth, particularly in Hong Kong. The bank recently acquired Citigroup Inc’s retail wealth management portfolio in mainland China, adding approximately $3.6 billion in assets and deposits.
Challenges have arisen in China due to slower economic growth and an unfolding real estate crisis. HSBC allocated an expected $1.1 billion for loan loss provisions in the quarter, with half of this linked to China’s commercial real estate sector. Noel Quinn believes that the Chinese property market has undergone a significant policy correction. While he does not anticipate a rapid recovery, he expects a gradual improvement in the market.
HSBC is one of the largest international banks operating in the Middle East. The bank’s strategy for the region remains unchanged despite ongoing regional conflicts. The Chief Financial Officer, Georges Elhedery, mentioned that the bank is providing support to its staff and clients affected by the ongoing conflict.
In summary, HSBC is actively returning capital to shareholders through a buyback program, despite a profit miss in the third quarter. The bank maintains its focus on its growth strategy in Asia while addressing challenges in the Chinese real estate market. Additionally, it continues to operate in the Middle East despite regional conflicts.