HSBC pledges $2bn share buyback as profits rise

Robyn Valdez
August 1, 2017

"The $200 to $300 million total is the cost of the transition to France", Gulliver said after HSBC reported an increase in profits for the first half of the year.

In regards to the numbers net profit was up 10%, while pre-tax profits came in at $10.2bn, compared with $9.7bn for the same period past year.

The bank had disappointed markets with just a $1 billion share buyback plan in the first six months of the year, after spending $2.5 billion doing so last year in a bid to wind down its cash stockpile. The update comes as the Asia-focused lender faces a change at the top, with both chief executive Stuart Gulliver and chairman Douglas Flint due to step down.

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Europe's biggest lender took a $4 million charge in the second-quarter for "costs associated with the UK's exit from the European Union", which chief executive Stuart Gulliver said could rise to between $200 million and $300 million. The chief executive officer has spent most of his tenure shrinking and imposing central control over HSBC's vast global network, exiting nearly 100 businesses and 18 countries while enduring several costly misconduct scandals.

Banks analyst Robert James, who works for Old Mutual Global Investors, said that the key to the investment case for HSBC shares is the $400bn (£304bn) surplus of deposits over liabilities held by the company. But on Monday he said that he could stay at the bank until December 2018, if an external candidate is appointed to take over. The stock buyback plan for 2017 shall raise the amount of total stock it has pledged to buy over the past year to $5.5bn.

HSBC said common equity tier 1 ratio, which is a measure of the bank's financial strength, sat at 14.7% on June 30, which was the highest amongst the major banks in Europe.

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For example, the Bank of England has estimated a single basis-point increase that might result from splitting the clearing of interest-rate swaps could cost firms across the euro zone €22 billion a year, according to a June 27 report.

London's financial executives have warned of the dire consequences for jobs and investment of a "cliff-edge" Brexit, in which no mutual free trade deal is struck before the two-year renegotiation period ends. Mr. Flint is leaving in September and will be replaced by Mark Tucker, former CEO of AIA Group Ltd. Mr. Gulliver has said he would leave next year after a new CEO is named. The brokerage raised its 2017-2020 earnings per share estimates by 4 percent to 5 percent.

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