HSBC offers $3 billion buyback as wealth income offsets rate cut anxiety
Business
HSBC offers $3 billion buyback as wealth income offsets rate cut anxiety
HONG KONG/LONDON (Reuters) - HSBC Holdings (HSBA.L), opens new tab announced a $3 billion share buyback and upgraded its income outlook on Wednesday, as the bank showed progress in its efforts to shield its business from global interest rate cuts that may hit lending revenue.
The lender's shares rose 4% in London as investors cheered its stable first-half profit growth, gains in wealth management income and narrowing losses in Chinese real estate.
Europe's biggest bank also set out a new goal for its return on average tangible equity - a key performance target - to be in the mid-teens in 2025, matching its estimate for 2024.
HSBC, which is due to welcome new CEO Georges Elhedery in September following the retirement of Noel Quinn, said it had succeeded in reducing its sensitivity to rate cuts through an insurance strategy known as a structural hedge.
Whereas a 1 percentage point fall in global interest rates in 2022 would have wiped $7 billion off HSBC's annual revenue, Quinn told reporters that impact had dropped to a potential $2.7 billion hit as of June.
"It's notable for me that sensitivity to interest rates is reduced ... It has done well as interest rates rose but expectation is that will reverse quickly," Iain Pyle, a portfolio manager at HSBC shareholder abrdn , told Reuters.
