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HSBC to launch up to $2B share buyback; legal provisions dent Q1 profit YOY

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HSBC to launch up to $2B share buyback; legal provisions dent Q1 profit YOY

HSBC Holdings PLC reported first-quarter profit attributable to ordinary shareholders of the parent company of $3.09 billion, down from $3.13 billion in the same period in 2017, and announced plans to buy back up to $2 billion of shares.

EPS for the quarter was 15 cents, compared to the year-ago 16 cents.

Pretax profit from Asia amounted to $4.77 billion in the period, compared to $4.09 billion a year earlier, while pretax loss from Europe narrowed year over year to $18 million from $206 million. The North America business booked a pretax loss of $596 million in the quarter, compared to a profit of $572 million a year earlier, while pretax profits in the Middle East and North Africa and Latin America came in at $437 million and $164 million, respectively, compared to the year-ago $387 million and $114 million a year ago.

"Our global businesses performed well in the first quarter, maintaining momentum from the end of 2017," Group CEO John Flint said. "We continue to benefit from interest rate rises and economic growth, particularly in Asia."

Net interest income grew on a yearly basis to $7.46 billion from $6.79 billion. Net fee income also increased over the period, to $3.51 billion from $3.22 billion.

Gains less losses from financial investments amounted to $101 million, compared to $338 million a year earlier.

The British lender booked no loan impairment charges and other credit risk provisions during the quarter, compared to $236 million a year ago.

Settlements and provisions in connection with legal and regulatory matters totaled $897 million in the period, compared to none a year ago. The bank said the amount includes provisions for a potential settlement of the U.S. Department of Justice's investigation into its legacy residential mortgage-backed securities activities, although there can be no assurances as to how and when the matter would be resolved or if the provision would be enough to cover the potential final cost of a settlement.

The annualized return on average ordinary shareholders' equity stood at 7.5% at the end of March, down from the year-ago 8.0%. The net interest margin ticked up to 1.67% from the year-ago 1.64%.

HSBC's common equity Tier 1 ratio stood at 14.5% as of March 31, unchanged from the end of 2017. Its leverage ratio was 5.6% at March-end, also unchanged from 2017-end.

Flint said the lender expects to launch the share buyback shortly after receiving appropriate regulatory clearances. It is the only share buyback that the bank is expected to announce in 2018.

The lender also intends to call two Tier 1 securities, with a nominal amount outstanding of $6 billion.

The bank's board of directors declared a first interim dividend of 10 cents per ordinary share for 2018, payable July 5 to shareholders on record May 18.

HSBC noted that first-quarter figures were calculated using the EU's regulatory transitional arrangements for the new IFRS 9 accounting standards, while the year-ago figures were under IAS 39.