HSBC launches $2 billion share buyback as annual profit rises 6.5%

HSBC, Europe’s largest lender, has announced a share buyback of up to $2 billion after posting a 6.5% increase in annual pre-tax profit, largely driven by the sale of its Canadian banking business.

However, the bank’s revenue slightly declined, and its earnings fell short of analyst expectations.

For the full year, HSBC reported:

• Pre-tax profit: $32.31 billion (vs. $32.63 billion expected)
• Revenue: $65.85 billion (vs. $66.52 billion expected)

Although pre-tax profit missed estimates compiled by LSEG, it surpassed the bank’s internal consensus forecast of $31.67 billion.

Revenue declined slightly from $66.1 billion in 2023.

In the fourth quarter, HSBC’s pre-tax profit nearly doubled to $2.3 billion, recovering from a $3 billion impairment charge in the same period last year.

However, quarterly revenue fell 11% to $2.3 billion.

HSBC expects to complete the $2 billion share buyback by the end of the first quarter of 2025.

The bank also plans to cut annual costs by $1.5 billion by 2026 as part of its broader restructuring strategy.

Under CEO Georges Elhedery, who took over in July 2023 following the retirement of Noel Quinn, HSBC has been streamlining its operations.

In October, the bank announced plans to restructure into four divisions, splitting operations into “Eastern markets” and “Western markets” to enhance efficiency and focus.

According to Bloomberg, the management will announce more job cuts, mostly in its investment bank division. Some of these cuts, mostly in Asia, have already started, but the company expects to supercharge them in the next few months.

Management has already taken further action to improve efficiency. It has reduced its management committee and combined its commercial and global banking divisions.

These actions are on top of the management’s other actions in the past few years, including exiting unprofitable markets. HSBC has exited top countries like Canada, the United States, Argentina, and France.

The bank expects the reorganization to generate approximately $300 million in cost savings in 2025.

HSBC projects net interest income of $42 billion for 2025, down from $43.7 billion in 2024, reflecting challenges in the global banking environment.

The bank’s Hong Kong-listed shares dipped 0.29% following the earnings release.

With its latest buyback and ongoing cost-cutting measures, HSBC aims to enhance shareholder value while navigating an evolving financial landscape.

Should you buy HSBC stock?

HSBC’s share price remains in a strong bull market and is hovering at its all-time high.

HSBC stock has risen in the last three straight weeks and by almost 300% from its lowest level in 2020.

So, what next for the HSBC stock price?

The weekly chart shows that the HSBC stock price has been in a strong uptrend in the past few months. It recently moved above the upper side of the ascending channel shown in black. 

HSBC stock has moved above the 50-week Exponential Moving Average (EMA). Further, the Relative Strength Index (RSI) has moved to the overbought level of 85, the highest swing in years. That is a sign that it has become highly overbought. 

The Percentage Price Oscillator (PPO) has also jumped to the highest point in years. Therefore, the stock may see a brief pullback and retest the upper side of the ascending channel. That retreat will be part of a break-and-retest pattern, a popular continuation sign. In the long-term, the HSBC share price will jump and get to 1,000p.

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