HSBC launches buyback as profit rockets 150pc

HSBC has announced a fresh share buyback program of US$2 billion (HK$15.6 billion) and raised its earning guidance after seeing its interim pretax profit soar nearly 150 percent to US$21.7 billion.

That beat the average analyst forecast of US$20.9 billion compiled by the lender.

The second interim dividend is kept steady at 10 US cents per share from the previous quarter. The London-based lender resumed paying quarterly dividends in the first quarter for the first time since 2019.

HSBC will also repurchase an additional US$2 billion following a previous buyback program revealed three months ago.

The lender posted a 50 percent jump in revenue to US$36.9 billion in the first half of the year from a year ago, benefiting from the high-interest rate environment globally. Its net interest margin rose 0.46 percentage points to 1.7 percent during the period.

HSBC lifted its forecast for net interest income this year to above US$35 billion. It also raised its goal for the return on tangible equity to about 15 percent for 2023 and 2024. Its Hong Kong business saw interim pretax profit surge 90 percent to US$10.9 billion in the first six months, accounting for more than half of the group's profit.

Shares of HSBC in the city rose 1.7 percent to a five-year-high of HK$66.30 yesterday, with its shares trading even higher in London. Morgan Stanley lifted its target price for the lender to HK$72.20 from HK$67.50.

During the period, the lender booked US$1.3 billion worth of expected credit losses in the first six months, including US$300 million exposed to China's commercial real estate sector.

Chief executive Noel Quinn noted that although the sector may need a longer time to recover, he believes the group's provisions are sufficient.

The better-than-expected results came as Quinn believes that the debate over a potential split of HSBC is over. The lender has been under pressure from its major shareholder Ping An Insurance to spin off its Asian unit to enhance shareholder value, although the push was rejected recently.

Meanwhile, UK banks are facing reforms over account closures as the UK government vowed to clamp down on lenders over such moves for political reasons.

Quinn said HSBC does not close customer accounts based on their "personal views" and added that the issue will not provide any incentive for the group to move its headquarters away from the UK.

Banks, including HSBC, are also facing more scrutiny by UK regulators to pass on more benefits, ranging from interest rate hikes to savers. Quinn noted that HSBC has been offering fair and appropriate products to customers, whether they are mortgage or saving products.

On possible investments, Quinn said HSBC will be open-minded to do further bolt-on acquisitions after the lender recently acquired the UK arm of collapsed Silicon Valley Bank.

caroline.zheng@singtaonewscorp.com