HSBC Raises Profitability Outlook Amid Mixed Signals
"And speaking of the bank earnings and credit as well, the top red story for HSBC on the terminal at the moment is that it's reviewing its ties to hedge funds with credit fears on the rise. But lots of different lines out of HSBC this morning and the shares up. Yeah, the shares are actually up. It's quite an interesting story. It actually raised its profitability outlook, which is probably why the shares are up, even though there was a fall in third quarter profit due to a big provision. It had to set aside $1.1 billion to cover litigation by investors who lost money in the fraud case dating back years. Despite the mixed bag, investors continue to put their trust in the CEO, who has overseen the largest revamp in at least a decade with major job cuts and strategic bets in Hong Kong. However, some analysts remain cautious given issues like falling rates, muted loan growth, and impairments in the commercial real estate market."
The discussion on HSBC focuses on its raised profitability outlook, which has supported share gains despite a significant provision and ongoing headwinds. While the CEO's revamp is noted positively, concerns remain regarding falling rates, slow loan growth, and elevated property impairments.
HSBC Faces Near-Term Buyback Constraints
"What about the investor reaction though? Yeah, they're actually are down quite a bit this morning after announcing plans to privatize Hangang Bank, which is one of its Hong Kong subsidiaries that has been in quite a troubled spot lately. So, HSBC owns about 63% of that bank and it will spend around $14 billion buying the shares it doesn't already hold. The problem that investors seem to have with this is that to keep its capital ratio within range, HSBC said it will have to refrain from buybacks for the next three quarters. So investors tend to want those buybacks, which explains the shares being down this morning."
The commentary highlights that HSBC's plan to privatize its troubled Hong Kong subsidiary and the subsequent pause on share buybacks for three quarters has weighed on investor sentiment, causing the shares to drop. This reflects concerns over near-term shareholder returns despite the strategic long-term growth investment in Hong Kong.
HSBC Restructuring and Halt on Buybacks Concern Investors
"And then secondly HSBC planning to take their Hong Kong unit Hen Bank private. So they're going to buy out minority investors. They'll spend about 14 billion US on that. Um but as a result to kind of have enough cash for this to finance this, they're going to refrain from buybacks for the next three quarters. So shareholders not reacting positively to that. So shares fell both in London and in Hong Kong where they're where they're listed."
Louise Moon explains that HSBC is moving to privatize its Hong Kong unit by buying out minority investors at a cost of around 14 billion US dollars, which has forced the bank to halt buybacks for the coming three quarters. This measure has led to a negative market reaction with shares falling in both London and Hong Kong.