LONDON: A third share buyback in a year by HSBC underlined progress in the turnaround plan for Europe’s biggest bank, with profit also growing by 5 percent in the first half of 2017.
The news sent HSBC shares up three percent to a four-year high of 764 pence each in London, as the bank signaled further buybacks and confidence it can continue to improve revenues from growth in Asia.
Chief Executive Officer Stuart Gulliver and Chairman Douglas Flint are both retiring, leaving a legacy of improving revenue and returning more capital to shareholders, having focused on trimming the bank’s empire and shifting its focus eastwards.
The latest share buyback, of up to $2 billion, comes as HSBC uses excess capital to offset the dilutive effect of shares paid out as dividends. It completed a previously announced $1 billion buyback in April.
The buybacks and sustained dividends show HSBC further ahead in its turnaround compared with British-based rivals including Barclays and Standard Chartered which have suspended payouts as they restructure.
“The return of capital comes from the fact that the business is very accretive, very profitable … the dividend is 51 cents for the foreseeable future,” HSBC Finance Director Iain Mackay told Reuters on Monday.
HSBC said its common equity tier 1 ratio — a measure of financial strength — was 14.7 percent at the end of June, the highest among major European banks.
The ratio is set to increase further as the bank repatriates about $8 billion stuck at its U.S. subsidiary, following approval last year from the U.S. Federal Reserve, potentially enabling further buybacks.
“I cannot tell you whether we’ll do a further buyback this year, but we are using buybacks as a regular part of the toolkit to manage returns to shareholders,” Gulliver told reporters on a conference call.
The latest buyback will take the total of HSBC share buybacks since the second half of 2016 to $5.5 billion.
HSBC’s dividends totaled $10.1 billion in 2016, $10 billion in 2015 and $9.6 billion in 2014.
For the half-year through June, pretax profit rose to $10.2 billion from $9.7 billion in the same period a year earlier, a result that compared with the $9.5 billion average estimate drawn from analysts polled by the bank.