HSBC has announced an intention to buy back $2bn (£1.52bn) worth of its own shares as it reported a 5 per cent increase in operating profits for the first six months of this year
HSBC shares have performed strongly over the past year, as the decline in the value of the pound relative to the dollar has enhanced the value in sterling terms of the bank's overseas earnings.
Although listed in the UK, only 10 per cent of group revenue comes from here, with 44 per cent in Asia and around 40 per cent in the US.
HSBC shares are up three per cent since the results announcement at 7am this morning (31 July). The shares have risen from £4.82 to £7.71 over the last 12 months.
Operating profit for the half-year to June 30 was $10.2bn (£7.78bn).
Chief executive Stuart Gulliver said group revenue was down 11 per cent as the company sold off businesses it does not consider to be central to its long-term strategy.
Banks analyst Robert James, who works for Old Mutual Global Investors, said that the key to the investment case for HSBC shares is the $400bn (£304bn) surplus of deposits over liabilities held by the company.
This cash is held in assets such as cash and short-dated US government bonds.
The yields on those assets has been very weak as US interest rates have been low. But as rates rise, so will the yield on those assets.
He believes the impact of recent US interest rates rises will not fully be felt in the accounts of HSBS for another year, but that the impact on profits will be “very significant.”
Mr Gulliver said the $2bn (£1.52bn) share buyback will take the total spent by HSBC on buying back its own shares to $3.5bn (£2.67bn) buying back its own shares since the second half of 2016.
david.thorpe@ft.com
