HSBC Announces $2 Billion Share Buyback as Profit Rises -- Update

By Margot Patrick and Joanne Chiu Features Dow Jones Newswires

HSBC Holdings PLC will buy back another $2 billion in shares and left the door open to return more cash to shareholders as strong returns in its business bolster its capital.

Continue Reading Below

The global bank giant has been generating more profit than it returns in dividends, making it one of Europe's best capitalized banks and leading it to start returning cash last year. HSBC has also freed up capital in its U.S. unit after a multiyears effort to cut down an old consumer loan book there.

HSBC said Monday that net profit for the second quarter rose 57% to $3.87 billion from $2.47 billion in the same period a year earlier. Its profit before tax for the period rose 47% to $5.3 billion.

The U.K. lender said announced buybacks since the second half of 2016 will reach $5.5 billion after the planned $2 billion repurchase.

Chief Executive Stuart Gulliver in an interview said the bank is seeing the fruits of the strategy he laid out in June 2015, including getting more cross-unit business from its 38 million customers. Revenue from such cross-selling rose to $5.9 billion in the second half from $5 billion in the first half of 2016, he said.

HSBC is one of the few remaining so-called universal banks that seeks to boost overall profit and market positions by combining retail banking, commercial banking and investment banking. Many banks backtracked from that broad business model after the financial crisis and narrowed their focus, but HSBC and a few competitors such as J.P. Morgan and Citigroup Inc. say it can still pay off.

Continue Reading Below

"It's an obsession because we need to prove the logic of the network that comes from referrals going between the three global business," Mr. Gulliver said.

"Global banking and markets ought to be taking commercial clients to the high-yield bond market, and retail ought to be introducing high-end premier accounts to the private bank," he said.

For the first half, HSBC's net profit was $7 billion, up 10% from $6.36 billion a year earlier. Its profit before tax rose 5.4% to $10.24 billion.

First-half revenue fell 11% to $26.2 billion from $29.47 billion a year ago due to currency fluctuations, the absence of fair-value movements on its debt and a lack of revenue contribution from operations in Brazil following its sale, the bank said.

Mr. Gulliver said it was too soon to talk about his legacy at the bank, as he nears the end of a near four decade career there. He announced earlier this year that he would retire in 2018, after incoming Chairman Mark Tucker selects a new CEO.

Outgoing Chairman Douglas Flint in the interview said he is most proud of the management team in place at the bank as he prepares to leave his role this fall.

Write to Margot Patrick at margot.patrick@wsj.com and Joanne Chiu at joanne.chiu@wsj.com

(END) Dow Jones Newswires

July 31, 2017 03:05 ET (07:05 GMT)