HSBC completes latest round of US$7 billion stock buy-back as market awaits report on bumper 2023 profits

HSBC Holdings, the biggest commercial bank in Hong Kong, has completed a third round of buy-back to defend the stock amid a broader market sell-off, taking the cumulative purchases to US$7 billion since May 2023 as the lender prepares to report a jump in 2023 profits this week.

The UK lender, which generates most of its profits in Asia and counts Hong Kong as its single biggest market, rewarded its investors with dividends and accelerated buy-backs after overcoming credit losses incurred during the Covid-19 pandemic years. The bank is scheduled to report its full-year results after a board meeting on February 21.

Net profit probably surged 76 per cent to US$26.1 billion, according to consensus estimates by analysts compiled by Bloomberg, versus US$14.8 billion in 2022 and US$12.6 billion in 2021. Earnings doubled to UK$18.1 billion at the halfway mark on June 30, with CEO Noel Quinn raising its full-year guidance for net interest income following several rounds of rate hikes.

“HSBC benefited from a high interest-rate environment last year,” said Kenny Ng Lai-yin, a strategist at Everbright Securities International in Hong Kong. “The growth in interest income is expected to continue” while credit losses remain a matter of concern for investors, he added.

Pre-tax profit among Hong Kong’s retail banks increased by 62 per cent on aggregate last year, compared with 19 per cent in 2022 when Hong Kong’s business activities were still hobbled by anti-pandemic controls, according to data provided by the Hong Kong Monetary Authority (HKMA).

Hong Kong’s banks post bumper 2023 profits as rates swell margins

Higher interest rates, following successive increases by the Federal Reserve and HKMA since March 2022, helped widen net interest margins, while a general recovery in business activity fanned demand for banking services and wealth management products, HKMA deputy CEO Arthur Yuen Kwok-hang said last month.

Stock buy-backs in Hong Kong have surged over the past year to soften the blow as the city’s benchmark index suffered an unprecedented four-year crash through the end of 2023. HSBC has risen 8.3 per cent in Hong Kong since the buy-back in May 2023, although not without periodic slumps in September and October last year, and in January 2024.

Hong Kong-listed firms ploughed record US$14 billion into buy-backs in 2023

The bank’s shares traded 1 per cent higher at HK$62.55 at 2.15pm local time, while the Hang Seng Index declined 1 per cent to snap a three-day advance.

Some 186 Hong Kong-listed companies have spent HK$111.4 billion (US$14.3 billion) repurchasing their shares, according to Shanghai Securities News. WeChat operator Tencent topped the action with HK$41.8 billion while AIA Group was next with HK$26.8 billion.

“The impact of this news on HSBC’s stock price may not be significant as investors have already anticipated it,” Ng at Everbright said. “The market focus is on whether a new round of buy-back programme will be launched in the near future.”