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HSBC to buyback shares as profits fall

HSBC to buyback shares as profits fall

Banking giant HSBC has announced plans to buy back $2bn (£1.4bn) of its own shares, despite a 4 per cent drop in profits.

The company made £3.5bn in the first three months of 2018, compared with £3.6bn for the same period in 2017.

This was slightly worse than analysts had expected.

HSBC shares are 2.3 per cent lower this morning.

Thomas Moore, who runs the £1.2bn Standard Life UK Equity Income Unconstrained fund said “banks are at the level where they are a once in a decade opportunity".

"The legacy issues around regulation have been sorted out, and banks are major beneficiaries from higher bond yields.

"The market doesn’t seem to have realised the US 10-year bond yield is at 3 per cent, this is extremely good for banks.”

Banks benefit from higher bond yields because they are required to hold a certain portion of their assets in bonds or cash for regulatory reasons.

HSBC is the seventh largest holding in Mr Moore’s fund, representing an investment of around £37m.

HSBC chief executive John Flint, presiding over his first set of results, said the company has benefitted from higher bond yields, and also from the strong pace of economic growth in Asia.

Rob James, banks analyst at Old Mutual Global Investors has estimated HSBC have around £350bn of capital held in this way. Higher bond yields improve the returns available from this capital.

He said the company’s strategy continues to be to “pivot” towards the faster growing markets of Asia.

David.Thorpe@ft.com