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HSBC Gains on Doubling Profits, Proposing $2-Billion Buyback

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By Dhirendra Tripathi

Investing.com – HSBC stock (NYSE:HSBC) traded 0.7% higher in Monday’s premarket as the Asia-focused bank blew past third-quarter estimates and announced an up to $2-billion share buyback.

Driving the company’s doubling of profits in the September quarter was the release of reserves as the economy improved and so did the customer profile. The bank grew more confident about its balance sheet with expectations of only smaller defaults. This allowed it to release funds to the tune of $700 million. The bank said it expects to release some more amount in the ongoing quarter as asset quality improves.

In doing so, the bank joined its American rivals like JPMorgan (NYSE:JPM) and Bank of America (NYSE:BAC) which have also benefited from an improving economy that allowed them to release the emergency funds.

The bank was able brush off concerns about pandemic-related bad loans and property problems in China. The bank has lent $19.6 billion to China's property sector, where the Evergrande Group is grappling with debts of $300 billion. There is no last word yet on the fate of the real estate developer, once China’s biggest by assets.

Commercial banking revenue rose while wealth and personal banking fell 3%. Revenue at HSBC’s investment banking unit also fell 3%, including a 46% fall at global debt markets -- a drop the bank attributed to last year’s strong result. Another reason was the bank’s decision to pull back some from deploying as much capital as it would otherwise.

HSBC posted a net profit of $4.2 billion for the quarter compared to $2 billion a year earlier.

Revenue came in at $12.2 billion, up from $11.9 in the September quarter of last year.

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