HSBC Holdings PLC’s return to share buybacks has been met with muted enthusiasm from analysts, despite the bank posting a stronger-than-expected second quarter.
The Asia-focused lender announced a $1 billion buyback programme alongside a 60% rise in second-quarter pre-tax profit to $10.1 billion, catching markets off guard with the relatively modest repurchase figure.
The buyback marks HSBC’s first return to repurchases since the bank paused the programme to fund its acquisition of the remaining shares in Hang Seng Bank in October.
Jefferies analyst Joseph Dickerson described it as a “modestly lower buyback than we expected”, warning the announcement “may underwhelm” given wider market expectations.
Dickerson had pencilled in a $2 billion buyback, a figure he said appeared to match investor expectations, although there was no formal consensus forecast available.
UBS had also anticipated a $2 billion repurchase, with analyst Jason Napier saying he was “surprised” the return was not bigger given the strength of HSBC’s first-half performance.
The shortfall appears to reflect restrained ambition rather than weak underlying trading, with analysts noting the operational results themselves were broadly ahead of forecasts.
Second-quarter profit excluding notable items beat company-compiled consensus by 5%, as income came in ahead of expectations and operating costs remained in line with projections.
Loans increased 5% at constant currency, led by corporate and institutional banking alongside the UK business, while wealth income excluding net interest income rose 21% and net new money increased 8%.
“The direction of travel for consensus estimates looks to be slightly upwards following a 6% PBT beat in Q2 with notable balance sheet growth,” Dickerson said, offering a measured note of optimism.
HSBC also raised its expected savings from its ongoing restructuring programme to $2 billion, up from a previous target of $1.5 billion, signalling continued cost discipline across the group.
However, management flagged higher variable pay in the second half of the year and investment intended to support revenue growth heading into 2027, which tempered some of the positive sentiment.
The bank strengthened its interest income guidance only marginally, shifting its language from “around” $46 billion to “at least” $46 billion, while leaving longer-term financial targets unchanged.
UBS retained its neutral rating on the stock with a 1,520p price target, noting that HSBC is already valued at 2.2 times tangible book value, limiting the upside case.
Napier summarised the position bluntly, saying: “In short, HSBC is performing better than consensus forecasts but didn’t deliver the Banking NII or buyback we’d forecast and, with targets unchanged and higher costs flagged won’t, we think, force a market rethink on the financial outlook today.”