HSBC Announces $2bn Share Buyback Pushing Share Price up 3%
Aug 01, 2017, 22:52
HSBC also announced a share buyback of up to $2bn, expected to be completed in the second half of the year.
Net profit for the first half of the year rose 10% to $6.99bn from $6.36bn for the same period in 2016. Despite the drop in revenue the company was able to post a profit of $10.2 billion which is up over 5% from last year's $9.7 billion and beat estimates of $9.5 billion.
Mr Gulliver has overseen stringent job cuts and asset sales as part of efforts to boost profits, and on Monday said the bank is on track to achieve around six billion U.S. dollars cost savings by the end of the year.
The new buybacks, to be completed by December, will add to the $3.5 billion of repurchases since a year ago that have helped push the lender's stock up more than 50 percent in the past 12 months.
The share buybacks have been used to offset the effect of shares being paid out as dividends.
Europe's biggest lender took a $4 million charge in the second-quarter for "costs associated with the UK's exit from the European Union", which chief executive Stuart Gulliver said could rise to between $200 million and $300 million. He has spent most of his tenure attempting to improve profitability by shrinking HSBC's vast global network, exiting nearly 100 businesses and 18 countries. "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", said finance director Iain Mackay.
HSBC said common equity tier 1 ratio, which is a measure of the bank's financial strength, sat at 14.7% on June 30, which was the highest amongst the major banks in Europe.
Recent years have seen it cut jobs and sell assets worldwide to shrink the group back to profitability and maintain dividend payouts in an era of stricter banking regulations. In January, Gulliver said: "We will move in about two years time when Brexit becomes effective".
The ratio is set to increase further as the bank repatriates about $8 billion stuck at its US subsidiary, following approval previous year from the US Federal Reserve, potentially enabling further buybacks. Former AIA Group chief executive Tucker, HSBC's first ever externally appointed chairman, is set to take up the role on 1 October. This will help push the stock's value further up, one that is already up 49% over the past 12 months and year-to-date is up over 21%.
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The stock fell almost 5% to $25.42 following the announcement, leaving the price around 20% lower than where it started the year. Cash flow in GE's industrial segment was a positive $1.5 billion after a shocking first-quarter shortfall of $1.6 billion.
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