Although HSBC’s Q3 earnings missed analysts’ estimates on Monday, the FTSE 100 heavyweight’s update made for good reading with the bank committing to a fresh $3bn buyback.
The share buyback helped lift HSBC shares marginally to 602p as the prospect of cash being returned to shareholders offset mixed earnings and revenue.
“A larger than expected share buyback seems to be doing a lot of the heavy lifting for HSBC today – making up for some less than positive details in its third quarter results,” said Russ Mould, investment director at AJ Bell.
HSBC’s profit before tax rose by $4.5bn to $7.7bn in Q3 supported by higher interest rates, however, the comparison is to Q3 2022 when HSBC recorded a one-off $2.3bn impairment on French retail banking operations, enhancing the most recent quarter’s comparables.
That said, HSBC’s operations produced a 40% jump in revenue to $16.2bn as group net interest margins increased to 1.70%.
The strength of HSBC’s business has allowed them to announce a fresh $3bn buyback – the only FTSE 100 bank to do so in the latest round of earnings updates.
“The UK’s largest listed bank is showing off its capital strength with a fresh $3bn buyback despite missing expectations. There’s some noise to look through in these results, largely the massive impairment charge taken in the comparable period last year, which is why the year-on-year profit growth levels are quite so extreme. Under the hood, costs were a little higher than expected and there’s a question mark on how they’ll evolve over 2024. But apart from that, performance was broadly where markets thought it would be,” said Matt Britzman, equity analyst at Hargreaves Lansdown.
“After seeing Standard Chartered take an unexpected impairment last week relating to its China assets, credit losses were under a microscope. At $1.1bn, the charge for expected credit losses was in line with expectations, with $500m relating to Chinese commercial real estate assets. There’s still a cloud of uncertainty hovering over the market, but investors will be happy to see no nasty surprises.”
“There wasn’t much in these results to upset the apple cart and the fresh buy-back is testament to a strong capital position. HSBC is the only major UK-listed bank to still be up year-to-date after Standard Chartered left the club last week. Yet the valuation still looks downbeat, paving the way for some impressive investor returns.”