HSBC share price drops following lower-than-expected US$1 billion buy-back
The buy-back was announced after HSBC’s second-quarter pre-tax profit rose 60 per cent to US$10.15 billion, beating analysts’ estimate of US$9.5 billion
The share price of HSBC Holdings fell 2.5 per cent on Tuesday afternoon following the lender’s announcement of a lower-than-expected share buy-back.
HSBC – the top lender in Hong Kong – resumed its share repurchase programme for the first time since October on Tuesday, earmarking US$1 billion to buy back shares over the next three months, according to a stock exchange filing.
The bank said in October it would have to pause share buy-backs for three quarters to conserve capital for its US$14 billion acquisition of subsidiary Hang Seng Bank. The market had widely expected HSBC to resume repurchases in the July-to-September quarter, with estimates ranging from US$1.5 billion to US$2 billion.
The share buy-back, which fell short of expectations, led HSBC’s share price to fall 2.5 per cent to HK$164 in the early afternoon on Tuesday, following the announcement. It then recovered slightly, only to drop 1 per cent to HK$166.5. The stock has gained 36 per cent so far this year. The Hang Seng Index fell 0.6 per cent on Tuesday to 25852.92.
HSBC group chief financial officer Pam Kaur said the lender would need to reserve capital for dividend payments and to meet increasing loan demand.
“The loan draw this quarter has been twice the amount that it has been in previous quarters. Therefore, the residual excess capital for share buy-back is at a reduced number than what the analysts call up,” she said in a media briefing on Tuesday.