Europe's largest lender, HSBC, declared a share buyback program of up to $3 billion on Wednesday, following a better-than-expected pretax profit for the first half of the year, driven by a high-interest rate environment.
The bank reported a pretax profit of $21.56 billion for the six months ending in June, slightly down from $21.66 billion in the same period last year. However, this figure exceeded the $20.5 billion average of broker estimates compiled by HSBC, according to Reuters.
At 08:42 a.m. London time, HSBC's London-listed shares rose by 3.12%, while Hong Kong-listed shares climbed roughly 4.4%.
“We are growing and investing in our international retail and wealth business to sit alongside this, which is helping to diversify revenue,” HSBC’s outgoing CEO Noel Quinn said Wednesday. “Each of these strengths contributed to a good revenue performance in the first half of 2024, supported by higher interest rates.”
HSBC's revenue increased by 1.1% year-on-year to $37.3 billion, attributed to higher consumer activity in Wealth products within Wealth and Personal Banking (WPB) and Equities and Securities Financing in Global Banking and Markets (GBM). The bank's wealth revenue rose by 12% to $4.3 billion, with significant growth in investment distribution, asset management, and life insurance.
The bank emphasized its focus on diversifying revenues and maintaining a strong presence in its key markets, Hong Kong and the U.K. It reported that 345,000 new customers opened accounts in Hong Kong in the first half of the year, while international customers in Britain increased by 8% to 2.7 million.
HSBC also declared a second interim dividend of $0.10 per share and announced a share buyback of up to $3 billion, expected to be completed within three months. “That takes our total distribution to shareholders in 18 months to over $34 billion,” Quinn told CNBC. “And I think the standout performance is, I think, our ability to continue to grow revenue from alternative sources other than interest income.”
The bank's CET1 capital ratio, a measure of solvency, rose to 15.0%, up by 0.2 percentage points from the fourth quarter of last year and above the lender's guidance of 14% to 14.5%. HSBC's return on average tangible equity (ROTE), excluding notable items, was 17.0% for January to June, down from 18.5% in the same period last year. The bank provided new guidance of a "mid-teens return on average tangible equity in 2025," consistent with its 2024 outlook.
“The strong performance of the business gives us the confidence to say that we’ll be mid-teens return in 2025 as well,” Quinn told CNBC. Addressing the broader outlook, he noted encouraging signs for future economic growth in the U.K., describing the current economy as strong and resilient.
Jefferies analysts welcomed the new ROTE outlook, noting it "looks comfortably ahead of consensus around 12%." However, RBC Capital Markets analyst Benjamin Toms cautioned in a Wednesday note that "Following strong performance in 2023, we think the bank’s earnings momentum has come to an end," citing expected rate declines across HSBC’s core geographies. Toms added that while hedging and balance sheet growth could offset some challenges, remarkable growth is unlikely. He also noted decent cost control by HSBC since 2020, although transparency in disclosures remains an issue.
(Source:www.investing.com)
The bank reported a pretax profit of $21.56 billion for the six months ending in June, slightly down from $21.66 billion in the same period last year. However, this figure exceeded the $20.5 billion average of broker estimates compiled by HSBC, according to Reuters.
At 08:42 a.m. London time, HSBC's London-listed shares rose by 3.12%, while Hong Kong-listed shares climbed roughly 4.4%.
“We are growing and investing in our international retail and wealth business to sit alongside this, which is helping to diversify revenue,” HSBC’s outgoing CEO Noel Quinn said Wednesday. “Each of these strengths contributed to a good revenue performance in the first half of 2024, supported by higher interest rates.”
HSBC's revenue increased by 1.1% year-on-year to $37.3 billion, attributed to higher consumer activity in Wealth products within Wealth and Personal Banking (WPB) and Equities and Securities Financing in Global Banking and Markets (GBM). The bank's wealth revenue rose by 12% to $4.3 billion, with significant growth in investment distribution, asset management, and life insurance.
The bank emphasized its focus on diversifying revenues and maintaining a strong presence in its key markets, Hong Kong and the U.K. It reported that 345,000 new customers opened accounts in Hong Kong in the first half of the year, while international customers in Britain increased by 8% to 2.7 million.
HSBC also declared a second interim dividend of $0.10 per share and announced a share buyback of up to $3 billion, expected to be completed within three months. “That takes our total distribution to shareholders in 18 months to over $34 billion,” Quinn told CNBC. “And I think the standout performance is, I think, our ability to continue to grow revenue from alternative sources other than interest income.”
The bank's CET1 capital ratio, a measure of solvency, rose to 15.0%, up by 0.2 percentage points from the fourth quarter of last year and above the lender's guidance of 14% to 14.5%. HSBC's return on average tangible equity (ROTE), excluding notable items, was 17.0% for January to June, down from 18.5% in the same period last year. The bank provided new guidance of a "mid-teens return on average tangible equity in 2025," consistent with its 2024 outlook.
“The strong performance of the business gives us the confidence to say that we’ll be mid-teens return in 2025 as well,” Quinn told CNBC. Addressing the broader outlook, he noted encouraging signs for future economic growth in the U.K., describing the current economy as strong and resilient.
Jefferies analysts welcomed the new ROTE outlook, noting it "looks comfortably ahead of consensus around 12%." However, RBC Capital Markets analyst Benjamin Toms cautioned in a Wednesday note that "Following strong performance in 2023, we think the bank’s earnings momentum has come to an end," citing expected rate declines across HSBC’s core geographies. Toms added that while hedging and balance sheet growth could offset some challenges, remarkable growth is unlikely. He also noted decent cost control by HSBC since 2020, although transparency in disclosures remains an issue.
(Source:www.investing.com)