HSBC announces repurchase of $ 2 billion in shares as profits rise

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Global banking giant HSBC HSBC 0.07%

Holdings PLC said it would repurchase up to $ 2 billion in shares after its third quarter net income surged as the lender freed up more provisions than it previously made for bad debts.

The London-based bank, which makes most of its profits in Hong Kong and mainland China, earned $ 3.54 billion in the three months ending late September, compared with $ 1.36 billion at the same period last year.

Analysts expected the banking giant to report a profit of $ 2.22 billion for the quarter. Revenue was broadly stable at $ 12 billion.

HSBC said it reduced its bad debt provisions by $ 659 million in the third quarter. A year ago, it had recorded $ 785 million in expected credit losses when concerns over the economic impact of the coronavirus pandemic forced banks around the world to brace for massive credit losses.

Many of these losses did not materialize. As the global economy recovers, lenders have freed up past allowances and set aside less for current loans, increasing their profits.

“While we maintain a cautious view of the external risk environment, we believe the lows of recent quarters are behind us,” HSBC chief executive Noel Quinn said in a statement. This, together with the group’s “strong capital position”, has enabled HSBC to announce a share buyback of up to $ 2 billion which will begin soon, he added.

HSBC is focusing more on lucrative Asian markets and agreed to sell its retail banking business in France and the United States earlier this year. It achieved pre-tax profit of $ 1.77 billion in Hong Kong, down 6.5% from the third quarter of 2020, mainly due to decrease in net interest income in recent times.

Mainland China’s pre-tax profit rose 45% from a year ago to $ 749 million in the quarter, while that of HSBC’s UK bank more than doubled year-on-year to $ 1.49 billion.

HSBC’s strategic shift to Asia has been hampered by geopolitical tensions between China and Western countries. Some US and UK politicians have criticized the bank for failing to publicly criticize China’s imposition of a new national security law on Hong Kong. Mr Quinn told British politicians in January that it was not his job as a banker to oppose Chinese policies.

HSBC shares have risen around 15% this year, underperforming major London-based banks such as Barclays PLC and Lloyds Banking Group.

Last month, the bank paid an interim dividend of $ 0.07 per share for the first half of 2021. HSBC said on Monday it would not pay quarterly dividends this year, but will consider whether it should. do when she publishes her full year. results in February 2022.

Write to Simon Clark at [email protected] and Elaine Yu at [email protected]

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