Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

HSBC puts 2022 buyback ambitions on ice as inflation accelerates

Stock Markets Apr 26, 2022 07:16AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: A pedestrian wearing a face mask following the coronavirus disease (COVID-19) outbreak, walks past a HSBC bank branch in Hong Kong, China February 22, 2022. REUTERS/Lam Yik

By Anshuman Daga and Lawrence White

SINGAPORE/LONDON (Reuters) -HSBC has shelved plans for new stock buybacks this year after reporting an unexpected hit to its capital on Tuesday, as a cocktail of rising inflation, geopolitical tensions and economic weakness dented its prospects.

Shares in Europe's biggest bank were trading 3.6% lower by 1014 GMT against a 0.8% gain in the benchmark FTSE 100 index, as investors reacted to revised payout plans, which compounded disappointing news on the bank's balance sheet.

HSBC's core capital ratio, a key measure of a bank's financial strength, fell 1.7 percentage points to 14.1% from the end of 2021, driven in part by losses on a hedging strategy it has set up in advance of expected central bank rate hikes.

Capital "is still a very strong level, but an eyebrow raiser nonetheless," said Simon Peters, investment strategist at Algebris Investments.

The bank's capital will be further sapped when it books a loss of around $2.7 billion in the second half of the year, due to the sale of its France retail operations.

That comes as soaring energy prices and supply chain outages, partly due to the conflict in Ukraine, threaten to scupper a nascent global economic recovery from the pandemic.

HSBC Chief Executive Noel Quinn, who has run the London-headquartered bank for the last two years, is ploughing billions into Asia to drive growth, with a focus on the wealth management business. He has also moved global executives there.

Pretax profit of $4.17 billion for the first quarter ending on March 31, was down from $5.78 billion a year earlier, but beat the $3.72 billion average estimate of 16 analysts compiled by HSBC.

In February, HSBC, which earns about two-thirds of its reported pretax profit from Asia, brought forward its key profitability target by a year and more than doubled its annual profit as expected bad loans from the pandemic failed to materialise.

HSBC's revenues fell 3%, in part due to COVID-19 restrictions in the bank's biggest market of Hong Kong as its branches were closed, hitting its sales of investment products.

But Chief Financial Officer Ewen Stevenson told reporters the bank remained "massive bulls" on growth in the region and had no plans to change strategy there.

VOLATILITY PAIN

The lender blamed volatility in the value of some government and corporate bonds it holds as hedges against dips in interest income for its capital hit, a trend Stevenson said could continue this year for HSBC and other banks.

Those investments will eventually result in a positive return for the bank if rate hikes proceed as expected, Stevenson told Reuters.

HSBC meanwhile is "not considering" breaking itself up, Stevenson told reporters, after media reports that an anonymous shareholder had recommended the oft-discussed move to unlock the value of the bank's component businesses.

The bank said expected credit losses came in at $600 million in the first quarter, less than expected. In the same period last year it unlocked $400 million of reserves as the outlook improved.

The swing to a net credit loss mainly reflected the impacts of the Russia-Ukraine conflict and inflationary pressures on the forward economic outlook, the bank said.

On Tuesday, Swiss wealth titan UBS reported a 17% rise in quarterly net profit to its best since 2007 on the back of strong trading.

HSBC's smaller rival Standard Chartered (OTC:SCBFF) reports results on Thursday, followed by Southeast Asian banks such as DBS Group (OTC:DBSDY) on Friday.

HSBC also holds its annual shareholder meeting in London on Friday.

HSBC puts 2022 buyback ambitions on ice as inflation accelerates
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email