HSBC to buy back shares amid profit slumpComments
Mixed news from HSBC.
Europe’s biggest bank just reported a 29 percent drop in pretax profits for the first half of this year and a 45 percent slump for the period from April to June, but also said it will buy back $2.5 billion (2.23 billion euros) worth of shares.
That was designed to soothe investors and it appeared to work as HSBC’s share rose over five percent on Wednesday.
HSBC shares rise by most since April after it announces $2.5 billion stock buyback https://t.co/C2GygFyK9Zpic.twitter.com/zm4wXcw3Ze— Bloomberg (@business) August 3, 2016
The buy back will be done partly with money from the recent sale of its business in Brazil.
The bank is reducing its growth ambitions as Britain’s vote to leave the European Union clouds the UK’s economic prospects and Hong Kong absorbs slower growth in China.
#HSBC's strong liquidity & strict cost management make us highly resilient: Stuart Gulliver #HSBCresultspic.twitter.com/xPjULj8ZSM— HSBC (@HSBC) August 3, 2016
Group Chief Executive Stuart Gulliver said the bank had removed the word “progressive” from its guidance on dividend payout plans, as a reflection of tougher market conditions.
“‘Progressive’ was interpreted by everyone as meaning it is going to go up every quarter notwithstanding what is happening in the world, so what we are saying is we are committed to sustain the dividend at the current level,” he told Reuters.
Brexit effect, China slow down
Europe’s banking sector has been undermined by deteriorating profits due to record low interest rates. It is braced for fresh economic turmoil as Britain’s works out its future relationship with the EU.
Gulliver said the bank had seen a fall in applications for loans from small businesses in Britain following the June 23 referendum, but that the impact of Brexit had otherwise been ‘muted’ so far.
HSBC is also grappling with slowing growth in Asia, where first-half profit fell eight percent and plans to funnel capital from Western businesses into China’s Pearl River Delta region have been pared back.
“Our plans haven’t changed in China… but we are saying the redeployment of capital will take longer,” Gulliver said. He blamed China’s slowing growth and its fluctuating currency since the ‘Asia pivot’ strategy was announced last June.