HSBC sets aside US$3 billion for buy-back as result beats estimates in tribute to retiring CEO

Pre-tax profit rose 2 per cent to US$8.9 billion, better than the US$7.88 billion expected by analysts, said the bank that traces its roots to Hong Kong and Shanghai nearly two centuries ago.

HSBC said it would pay a quarterly dividend of 10 US cents per share in addition to its share buy-back.

“Our investment in wealth is delivering higher, more diversified revenue and we continue to grow our core international and scale businesses, all of which helped us to provide US$13.7 billion of distributions in the first half,” said Quinn in his final earnings statement to the Hong Kong stock exchange before his retirement. “We are confident that we have the right strategy and model to grow revenue, even in a lower interest rate environment, and are therefore providing new guidance of a mid-teens return on average tangible equity in 2025.”

Quinn is scheduled to officially hand over the reins of Europe’s largest bank on September 1 to Georges Elhedery, who was promoted from chief financial officer to the bank’s top job.

“I have always been immensely proud of the heritage of this bank and the strategic role it plays in the world,” Quinn said. “My aim when I took this job was to deliver financial performance to match our standing. Working together, I believe we have done that and created a strong platform for growth.”

“We’re going through, what I believe, is a very orderly handover process,” said Quinn. “It’s important for our shareholders, our customers and our colleagues, the transition from myself to Georges is orderly and smooth.

“Georges knows the business extremely well, so the handover is much simpler. As CFO, he knows the business intimately. I only have one piece of advice for him, and that’s to enjoy the role.”

On China, Quinn said “there’s still a long road of recovery for the real estate” sector, but “it’s going in the right direction, and we’re encouraged by some of the policy measures that have been taken recently.”

Revenue dropped 1 per cent in the second quarter to US$16.5 billion, which was higher than the market’s estimate of US$16.15 billion.

The gains were driven by strong growth in the wealth management and market-related businesses because of improved market sentiment, which helped offset the modest growth in lending.

The better-than-expected earnings were also the result of lower bad debt charges. During the second quarter, HSBC took US$300 million of credit impairments, 67 per cent lower than a year earlier.

This reflects lower charges related to potential soured loans in the bank’s Chinese commercial real estate portfolio, which has been a major source of bad debts over the past two years.

Net interest margin, an important measure of profitability, declined to 1.62 per cent at the end of June, compared with 1.72 per cent a year earlier.

HSBC’s business in Asia, which includes its largest market Hong Kong and that of its subsidiary Hang Seng Bank, saw a 7 per cent increase in pre-tax profit to US$5.43 billion.

HSBC’s shares advanced 2.3 per cent to HK$68.45 in the afternoon following the results announcement during the lunch break.

Hang Seng Bank reported a 1 per cent rise in net profit to HK$9.89 billion (US$1.26 billion) for the first half.

It will pay a second interim dividend of HK$1.2 per share, bringing the first-half dividends to HK$2.4 per share. The bank does not report quarterly earnings.