HSBC to spend $2bn on share buyback as profits boom

·2 min read
  (PA Archive)
(PA Archive)

HSBC profits are soaring, allowing it to begin handing back $2 billion to shareholders and plot a possible return to more regular dividend payments.

The banking giant saw profits up 74% to $5.4 billion in the last three months, a sign both of HSBC’s own revival and a wider return to form for the sector.

Last week Barclays reported a boom that will lead to chunky bonuses this year for its investment bankers. The big high street players NatWest and Lloyds will report later this week.

HSBC has ditched quarterly dividend payments, now paying them twice yearly. Its balance sheet is now strong enough to return to quarterly payments, something it will now consider.

The Bank of England has removed its Covid restrictions on banks paying divis.

A $2 billion share buyback programme will commence shortly. The stock is up from 320p a year ago to 435p today.

A year ago HSBC said it might have to begin charging for current accounts, the end of so-called free banking. Today finance director Ewen Stevenson suggested that rising interest rates, which boost bank profit margins, should make that unlikely.

The Bank of England could put rates up as soon as next month.

CEO Noel Quinn said: “While we retain a cautious outlook on the external risk environment, we believe that the lows of recent quarters are behind us.”

HSBC’s Canary Wharf office houses 7500 pre-pandemic. Around a third of those people are now coming in three to four days a week.

“We are not putting pressure on any of our employers to come in if they are nervous about travelling on public transport,” said Stevenson.

HSBC has made a point of not getting involved in SPAC’s, the special purpose acquisition companies that are all the rage on Wall Street.

Stevenson told Bloomberg: “We do think that this is a market that is going to have some issues and we’re pleased not to be exposed to it. A lot of SPACs that are happening are definitely top of the market behaviour at the moment.”

HSBC wrote back $700 million that it had set aside for Covid loans going bad

Richard Hunter at interactive investor said: “HSBC has flexed its financial muscles as it continues to emerge from the horror show of 2020.The numbers are flattered by further bad debt releases, in what will be the likely theme of the season, but the announcement of a share buyback programme is a positive endorsement of the bank’s own confidence in prospects.”

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