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HSBC shelves plans for stock buybacks for 2022 as profits fall

HSBC shelves plans for stock buybacks for 2022 as profits fall
HSBC shelves plans for stock buybacks for 2022 as profits fall

HSBC, the British multinational bank, has reportedly delayed plans for further stock buybacks this year, after reporting an abrupt blow to its capital on Tuesday, as a mixture of increasing inflation, economic downturn, and geopolitical tensions undermined its expectations.

With investors reacting to the revised compensation plans, which further exacerbated poor news on the balance sheet of the bank, shares in Europe's largest bank fell 2.2% by 0825 GMT against a gain of 0.6% in the underlying FTSE 100 index (.FTSE).

HSBC's core capital ratio, a key indicator of a bank's financial power, dropped 1.7 percentage points to 14.1% in 2022, owing in part to setbacks on a hedging plan it implemented in anticipation of the projected rate hikes by the central bank.

According to Algebris Investments investment strategist, Simon Peters, capital is indeed a very solid level, but shocking, nonetheless.

The bank's assets will be further reduced when it reports $2.7 million in losses in the second half of the year as a result of the sale of its French retail operations.

This comes as rising energy prices as well as supply chain disruptions, largely owing to the Ukraine crisis, threatening to derail a fledgling worldwide economic rebound from the pandemic.

Noel Quinn, HSBC's CEO, who has been in charge of the London-based bank for the past two years, is investing billions in Asia to fuel development, with a particular focus on the wealth management sector. He's also relocated worldwide executives to the city.

The Q1's pretax earnings of $4.17 billion dropped from $5.78 billion a year ago, but it topped the $3.72 billion average expectation of 16 analysts collected by HSBC.

However, Chief Financial Officer, Ewen Stevenson stated that the bank was still huge bull on the country's growth and does not plan to change its strategy.

Meanwhile, Stevenson further stated that HSBC is not pondering breaking itself apart, despite media reports that an unidentified shareholder had suggested the often-discussed step to unleash the value of HSBC's component businesses.

Source credit: https://www.reuters.com/business/hsbc-q1-pretax-profit-slides-revenues-fall-2022-04-26/

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Meghna Singh

An English Literature graduate, Meghna Singh ventured into the profession of content development to incorporate her knack for writing articles across verticals including technology, healthcare, business, and alike for News Origins and RunningAfrica. She has also completed her MBA in Tourism and worked as a content creator in the field of product development.