HSBC Holdings Plc launched a $3 billion share buyback program on October 29, 2023, even as its third-quarter profit missed analyst estimates due to rising costs.
The buyback, which is HSBC’s largest in over a decade, is a sign of confidence in the bank’s financial position and its outlook for the future.
However, the profit miss and rising costs are a reminder of the challenges that HSBC is facing, including a slowing global economy and a rising interest rate environment.
HSBC’s third-quarter profit fell 42% to $2.7 billion, missing analyst estimates of $3.1 billion.
The profit decline was due to a number of factors, including rising costs, higher provisions for bad loans, and a decline in investment banking income.
HSBC’s costs rose 10% in the third quarter, to $8.1 billion.
The cost increase was driven by higher employee expenses, technology investments, and regulatory compliance costs.
HSBC’s provisions for bad loans rose to $1.3 billion in the third quarter, up from $800 million in the second quarter. The increase in provisions was due to a deterioration in the economic outlook in some of the markets where HSBC operates.
HSBC’s investment banking income fell 38% in the third quarter, to $1.9 billion.
The decline in investment banking income was due to a slowdown in global dealmaking activity.
Despite the challenges, HSBC remains a strong bank with a solid capital position.
The bank’s common equity tier 1 (CET1) ratio, a measure of financial strength, was 13.8% at the end of the third quarter.
HSBC’s share buyback program is a positive sign for investors.
The buyback will return capital to shareholders and support the bank’s share price. However, the profit miss and rising costs are a reminder of the challenges that HSBC is facing.
The bank will need to carefully manage its costs and provisions for bad loans in order to meet its financial targets in the coming quarters.