On November 1st, HSBC Holdings announced a new round of share buybacks.
The announcement states that HSBC Holdings and Morgan Stanley& Co. International PLC (Morgan Stanley) has entered into an entrusted repurchase agreement, allowing Morgan Stanley (as the principal) to purchase (subject to regulatory approval) up to a total value of $3 billion of common stock from November 1, 2023 to no later than February 16, 2024, and simultaneously sell the relevant shares to HSBC.
HSBC Holdings pointed out that Morgan Stanley will make trading decisions on repurchase related matters independently of HSBC. The purchase of ordinary shares will take place on the London Stock Exchange, Aquis Exchange, Cboe Europe Limited (through BXE and CXE trading commission ledgers), or Turquoise (collectively referred to as the UK location) on the Stock Exchange of Hong Kong Limited (SEHK).
The company stated that the repurchase can purchase up to 1.48 billion shares of common stock, which is the number of common stocks that can be repurchased according to the authorization granted by HSBC Holdings in 2023, after deducting the number of shares that have been repurchased since the authorization was granted. The repurchased ordinary shares will be cancelled.
It is worth mentioning that this is the third time HSBC Holdings has publicly announced a share buyback this year.
In May this year, HSBC announced a share buyback, with a maximum amount of $1 billion (buyback). The repurchase aims to reduce the number of issued common shares of HSBC. HSBC and Merrill Lynch International (Merrill Lynch Merrill Lynch) have entered into multiple irrevocable non discretionary repurchase agreements, allowing Merrill Lynch (as the principal) to purchase (subject to regulatory approval still in effect) up to $1 billion in common stock from May 4, 2022 to no later than August 31, 2022, and simultaneously sell the relevant shares to HSBC. The repurchased ordinary shares will be cancelled.
In August, HSBC Holdings announced the launch of a repurchase, with a maximum amount of $2 billion (repurchase). The repurchase aims to reduce the number of HSBC issued common shares. HSBC and Merrill Lynch International (Merrill Lynch) have entered into multiple irrevocable non discretionary repurchase agreements, allowing Merrill Lynch (as the principal) to purchase (subject to regulatory approval) up to $2 billion worth of common stock from August 3, 2023 to no later than October 26, 2023, and sell the relevant shares to HSBC simultaneously. Similarly, the repurchased ordinary shares will be cancelled.
The interface news reporter noticed that according to publicly available information, HSBC Holdings has been repurchasing shares since 2016. In terms of the repurchase amount, $3 billion is the largest repurchase amount since 2016, with previous repurchase amounts mostly being $1, $2, or $2.5 billion.
A Hong Kong stock analyst pointed out that the company's repurchase indicates that the management believes that the market value is lower than the intrinsic value, and hopes that the repurchase can improve shareholder returns. The more the repurchase amount, the lower the current price.
Cen Zhiyong, the head of research at Metropolitan Finance in Hong Kong, also believes that repurchase has a positive effect and hedging can help improve returns per share.
According to HSBC Holdings' third quarter report, the benchmark pre tax profit for the first nine months of 2023 was $29.4 billion, an increase of $17.4 billion compared to the first nine months of 2022; The average tangible return on equity is 19.7%, and excluding strategic transactions, it is 17.1%. In 2023, HSBC Holdings has also announced three repurchases of shares, totaling $7 billion, and has declared three dividends, totaling $0.3 per common share.
According to Wind data, HSBC Holdings has accumulated buybacks of HKD 15.621 billion (approximately $2 billion) so far this year. Interface News reporters noticed that the repurchase volume of Hong Kong stocks this year remains high compared to last year, with HSBC Holdings ranking third in terms of repurchase amount and Tencent Holdings having the highest repurchase amount of HKD 35.778 billion.
According to the third quarter report, HSBC Holdings' pre tax profit increased by $4.5 billion to $7.7 billion in the third quarter. HSBC pointed out that part of the increase was due to a recorded impairment of $2.3 billion in the third quarter of 2022, related to the planned sale of the French retail banking business, of which $2.1 billion had been reversed in the third quarter of 2023 due to uncertainty about the completion of the transaction. It is expected that the business will be reclassified as held for sale in the fourth quarter of 2023, and the impairment will be reclassified accordingly. In addition, the company's revenue increased by $4.7 billion, a 40% increase, to $16.2 billion, due to the interest rate hike environment supporting the net interest income growth of all global businesses and an increase in non interest income.
In terms of stock price, as of 3pm on November 2nd, HSBC Holdings' stock price was HKD 56.95 per share, a slight increase from the previous trading day.