HSBC to buy back US$3 billion shares as profit beats estimates

HSBC Holdings announced a fresh multi-billion US dollar stock buyback as it reported better-than-estimated earnings days after unveiling a major restructuring of its business.

Europe’s largest bank said on Tuesday (Oct 29) that it would repurchase up to US$3 billion shares. Third-quarter pretax profit rose 9.9 per cent from a year earlier to US$8.5 billion, beating estimates, according to a 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.

“We delivered another good quarter, which shows that our strategy is working,” chief executive officer Georges Elhedery said, presiding over his first set of financial results since taking the helm at the British lender on Sep 2. “There was strong revenue growth and good performances in wealth and wholesale transaction banking.”

HSBC has already handed US$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.

Since being promoted to the top job, Elhedery, the former chief financial officer, has been emphasising 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. BLOOMBERG