HSBC Posts Loss But Capital Growth Lifts Buyback Prospects -- 3rd Update
November 07 2016 - 05:02AM
Dow Jones News
By Margot Patrick and Julie Steinberg
HSBC Holdings PLC's third-quarter earnings Monday were hit by a
$1.74 billion charge to exit Brazil, but a growing capital buffer
at the bank raised hopes of extra payouts for shareholders in the
years ahead.
HSBC's main capital ratio jumped to 13.9% at Sept. 30 from 12.1%
at the end of June, boosted by a regulatory change in how it
accounts for its stake in China's Bank of Communications. Analysts
said that was good news for HSBC's dividend, and the prospect of
more share buybacks once a program currently under way is
completed.
Shares were up 4.52% in Hong Kong after the earnings
announcement.
HSBC has been pulling out of dozens of countries and businesses
since 2011 to improve returns. Selling its Brazil business to Banco
Bradesco SA in July contributed to it reporting a $204 million net
loss in the quarter, against a $5.23 billion net profit in the same
three months of 2015. The slumping pound and moves in the U.S.
dollar against the Mexican peso also weighed on earnings, the bank
said.
The weak results come against the backdrop of concerns about its
Asia strategy and questions about the effects of the U.K. vote to
leave the European Union. On Thursday, a U.K. court ruled that
Prime Minister Theresa May can't start the exit process without
approval from Parliament.
In the U.K., one of the bank's home markets along with Hong
Kong, HSBC said mortgage lending and loans to small businesses rose
in the third quarter, easing concerns that Brexit would stall
activity.
Chief Executive Stuart Gulliver in an interview said the
economic response so far is reassuring. "What we obviously are
concerned about is if next year we see lower GDP growth and higher
inflation. Then the overall dynamic may start to shift."
On a pretax basis, the bank's profit plunged 86% to $843 million
from $6.1 billion. Its adjusted revenue rose 2% to $12.79 billion,
due in part to higher contributions from its fixed income
businesses as the bank gained market share in Europe, HSBC
said.
HSBC shares have risen more than 11% since August, when it
unveiled a plan to spend up to $2.5 billion in the second half to
repurchase shares.
The bank said it has completed 59% of its share-repurchase plan,
which is expected to conclude in late 2016 or early 2017.
Write to Margot Patrick at margot.patrick@wsj.com and Julie
Steinberg at julie.steinberg@wsj.com
(END) Dow Jones Newswires
November 07, 2016 04:47 ET (09:47 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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