HSBC to Buy Back $3 Billion Shares as Profit Beats Estimates

HSBC Holdings Plc announced a fresh multibillion-dollar stock buyback as it reported better-than-estimated earnings, days after unveiling a major overhaul of its businesses.

Europe’s largest bank said Tuesday that it would repurchase up to $3 billion of shares on the back of a 9.9% gain in pretax profit from a year earlier to $8.48 billion. The results were driven by gains in divisions including its wealth arm, which benefited from higher private banking volumes in Asia, according to its statement.

The buyback follows last week’s unveiling of HSBC’s biggest revamp in at least a decade that would see the merger of its global commercial and investment banking units. The move also included a wider geographical overhaul that would make Hong Kong and the UK standalone units and fold Asia Pacific and the Middle East into an Eastern regional division. 

“There was strong revenue growth and good performances in wealth and wholesale transaction banking,” Chief Executive Officer Georges Elhedery said in a statement, presiding over his first set of financial results since taking the helm at the British lender on Sept. 2. 

The bank gained 243,000 customers in Hong Kong in the quarter, while overall fee income in wealth rose 32%. HSBC has targeted becoming the premier wealth bank in Asia, as it has divested other business across the world. 

HSBC shares

HSBC shares jumped as much as 4.9% in London on Tuesday, the biggest intraday gain in six months, after rallying earlier in Hong Kong.

HSBC has already handed $34.4 billion to shareholders in the past 18 months, much of it in the form of stock buybacks, which have become one of the bank’s preferred ways to distribute capital to its investors. Despite this, the stock has performed relatively modestly compared to other UK banks, such as Barclays Plc. 

Since being promoted to the top job, Elhedery, the former chief financial officer, has been emphasizing cost controls, telling staff in his first town hall in Hong Kong last month that his focus would be on spending more wisely rather than less. With central banks around the world embarking on a rate-cutting cycle — something that will eat into lenders’ margins — the pressure is rising on HSBC to find ways to cut expenses. 

HSBC, whose operating expenses increased slightly to $8.1 billion in the quarter, has already initiated a slew of measures to curb costs. It’s canceled some internal events, slowed hiring and put fresh limits on staff travel, with senior bankers forced to delay planned trips, Bloomberg News has reported. 

On a call with investors on Tuesday, Elhedery sought to drive home the point that his restructuring plan, which is already underway, isn’t about splitting up the bank but rather about simplification of its operations. He added that the measures would result in net cost savings, but investors will have to wait until February when the bank announces its full-year results to hear what those will be.

He also warned that senior managers would be the main targets of any related job losses.

Senior roles

“We are going to see a reduction of numbers of senior roles, and therefore there will be inevitably senior role exits over the coming months that will be part of the reorganization,” said Elhedery.

The lender said last week that some key executives were leaving as part of its restructuring. They include Stephen Moss, who runs Middle East and North Africa, along with Colin Bell, who led operations across Europe. Greg Guyett, the current CEO of global banking and markets, was named chair of the strategic clients group, a newly created role. 

Elhedery said a “selective review” of the bank’s operations would be taking place that could lead to further country exits, as well as sales of product lines that no longer make sense. On the other hand, he added that acquisitions could also be on the cards in areas where the company wants to grow.

The bank is continuing to get out of non-core businesses and plans to complete its sale of Argentina in the fourth quarter of 2024, according to its earnings statement. It agreed to sell its South African corporate branch unit to FirstRand Ltd. last month. Such moves are part of its plans to shed businesses in many parts of the world and boost investment in Asia.