HSBC plans to buyback $3 billion, CEO touts capital strength

HSBC Holdings Plc has announced a new buyback program, hinting at potential future returns for investors despite announcing a third-quarter profit that fell short of market expectations.

The London-based bank announced it would soon begin purchasing an additional $3 billion in its shares. This will bring the total stock repurchases this year to $7 billion. HSBC CEO Noel Quinn hinted that there could be more.

Analysts tracked by the firm estimated a pretax profit of $8.1 billion for the three-month period ending September. Quinn explained that this was due in part to a $600m charge related to the bank’s hedging strategy. This would be beneficial to the bank in future quarters.

Operating expenses increased by 2% compared to the same period last year. The increase was due in part to the planned 300 million dollar increase in performance pay. It also reflected higher technology expenditures. HSBC now expects cost growth to be about 4% in 2023. This is up from the previous target of 3%.

HSBC’s shares in London were little affected on Monday.

It said that the British bank, whose income is largely generated in Asia, had been investing more in the region in order to tap into markets with faster growth. They also saw “good wealth performances,” especially in Hong Kong. HSBC has agreed to purchase Citigroup Inc.’s retail wealth-management portfolio in mainland China. This month, HSBC will add about $3.6 billion of assets and deposits by wealth customers in 11 major cities.

The slowing of China’s growth and the escalating real estate crisis have made it difficult for many businesses to expand into the second largest economy in world. Bank loan loss provisions were expected to be $1.1 billion in the third quarter. Half of this was attributed to China’s real estate market.

Quinn stated that the Chinese real estate market has experienced “a huge policy correction,” adding that prices have hit a low.

I think that we are at the bottom, but it will be a long time before the market recovers and gains momentum.” “I don’t expect a major reversal of that sector within the next year or two, but it will be a gradual change from where we are now.”

HSBC, one of the largest international banks in the Middle East, said its strategy for the area remained unchanged despite Israel’s war with Hamas which threatens to escalate into a larger conflict. Georges Elhedery, Chief Financial Officer of HSBC, said that the bank is supporting staff and clients affected by the conflict.

The lender maintained its target of a mid-teens increase in return on tangible equity. It expects to earn net interest income this year of over $35 billion. The lender’s forecast for expected credit losses remained unchanged.

HSBC has a mixed performance across its businesses. The lender’s wealth and personal banking division reported that growth in Hong Kong mortgages and UK mortgages had driven a $2 billion increase in customer lending, which was offset by deleveraging at its private banking unit.

Commercial banking saw a drop in demand for loans among clients, resulting in a 5% decrease year-on-year. In its Global Banking and Markets division, which serves HSBC’s biggest corporate clients, a lower level of activity in Asia was offset by a higher demand for loan in Europe.

Global banking and market revenues increased 2% to $3.9billion. The global debt markets unit and the securities financing unit were particularly bright spots for the company. Both units recorded double-digit increases in revenue year-on-year, which helped offset the effect of declining earnings from foreign currency and equities.

HSBC, as part of its Asia-centric strategy, has made several acquisitions, notably in wealth management, in the last few years. Quinn stated that the bank is open to more deals.

He said, “I believe it’s correct to continue building our capabilities through bolt-ons.” He said that the bank did not want to make larger deals.