HSBC Holdings PLC announced a $2 billion stock buyback and a surge in third-quarter net profit as the lender navigated rising geopolitical and property-market risks in China.

The London-based bank earned $3.54 billion in the three months to the end of September, up from $1.36 billion in the same period last year. Its profits were lifted by the release of money it had set aside a year ago, when banks were bracing their loan books for widespread pandemic-related defaults.

Those losses mostly haven’t materialized. As the global economy recovers, banks have been releasing past provisions while setting aside less for current loans, boosting their profits.

Analysts had expected HSBC to report profit of $2.22 billion. Revenue was roughly flat at $12 billion.

HSBC’s shares rose 1% on the better-than-expected profit and buyback announcement. Chief Financial Officer Ewen Stevenson said in an interview that the bank might announce additional buybacks next year.

“While we retain a cautious outlook on the external risk environment, we believe that the lows of recent quarters are behind us,” HSBC Chief Executive Noel Quinn said in a statement. That, along with the group’s “strong capital position,” enabled HSBC to announce a share buyback of up to $2 billion that will commence soon, he added.

HSBC is sharpening its focus on lucrative Asian markets and agreed to sell its French and U.S. retail-banking operations earlier this year. It earned a pretax profit of $1.77 billion in Hong Kong, down 6.5% from the third quarter of 2020, due mainly to lower net interest income in the recent period.

Pretax profit from mainland China rose 45% from a year earlier to $749 million in the quarter, while that at HSBC’s U.K. bank more than doubled to $1.49 billion.

HSBC said it is closely monitoring the Chinese real-estate market, where some developers, including property giant China Evergrande Group, are struggling to keep up with debt payments. HSBC said that as of Sept. 30 it had no direct credit exposure to property companies deemed the riskiest by the Chinese government.

“We’re not complacent about it, but equally we’re not overly concerned,” Mr. Stevenson said. He said the Hong Kong property market, where HSBC is a major lender, so far appears insulated from the stress on the mainland.

HSBC’s tilt toward Asia has been hampered by geopolitical tension between China and Western nations. Some U.S. and U.K. politicians rebuked the bank for not publicly criticizing China’s imposition of a new national security law in Hong Kong. Mr. Quinn told U.K. politicians in January that it wasn’t his job as a banker to oppose Chinese policies. On Monday, the bank warned that diplomatic tensions between China and the West could create “regulatory, reputational and market risks.”

The bank is considering three or four acquisitions to boost its Asian wealth-management and insurance operations, which could total about $2 billion if deals are struck in the next year, Mr. Quinn told journalists. In August, HSBC agreed to pay $575 million for a Singapore-based life-insurance unit of France’s Axa SA.

The bank last month paid out an interim dividend of $0.07 a share for the first half of 2021. HSBC said Monday that it wouldn’t pay quarterly dividends this year, but will review whether to do so by the time it reports its full-year results in February 2022.

This story has been published from a wire agency feed without modifications to the text


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