Hope at HSBC: Stock Buybacks -- WSJ
November 08 2016 - 03:02AM
Dow Jones News
By Margot Patrick and Julie Steinberg
HSBC Holdings PLC's growing capital buffer raised hopes of extra
payouts for shareholders, turning attention away from a weak third
quarter for the bank.
HSBC shares rose 4% after the bank reported Monday that its main
capital ratio jumped to 13.9% at Sept. 30 from 12.1% at the end of
June, boosted by a regulatory change in the treatment of its stake
in China's Bank of Communications. Analysts said that was good news
for HSBC's dividend, and should mean additional share buybacks once
a program currently under way is completed.
The lift came as the bank's pretax profit plunged 86% to $843
million from $6.1 billion in the third quarter, hit by a $1.7
billion charge for selling its Brazil business and a weakened pound
and Mexican peso against the dollar. It posted a $204 million net
loss in the quarter, against a $5.23 billion net profit in the same
three months of 2015, largely because of the Brazil sale and
changes in the value of its own debt.
HSBC has been pulling out of dozens of countries and businesses
since 2011 to improve returns. In July, it completed the sale of
HSBC Brazil to Banco Bradesco SA.
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.
The overall 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.
"The U.K. bank's numbers have been reasonably robust since
Brexit," Chief Executive Stuart Gulliver told reporters.
"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, " he said in an interview Monday.
HSBC shares have risen 29% 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.
Analysts said Monday the bank could spend billions more to buy
back additional shares in the next couple of years.
Mr. Gulliver said he couldn't comment on the projections, but
that the growing buffer "does open up the possibility of us
contemplating further buybacks in the future, subject to regulatory
approval."
HSBC freed $5.6 billion after agreeing with the Bank of England
that it should only hold capital against its equity investment in
BoCom rather than against a share of BoCom's total assets.
Write to Margot Patrick at margot.patrick@wsj.com and Julie
Steinberg at julie.steinberg@wsj.com
(END) Dow Jones Newswires
November 08, 2016 02:47 ET (07:47 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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