Investors can be pleased at the announcement of a share buyback of up to $1bn.
HSBC’s interim results take a back seat as Flint departs the bank
- Market reacts shares initially drop in early morning trading, before recovering.
- Pre-tax profits up 7% and 23% rise in lending in the bank’s key Asian region.
- As a significant dividend payer, offering a decent yield, we continue to recommend the shares as a ‘buy’.
This morning’s figures from the banking giant have been overshadowed by the news that CEO John Flint is to step down with immediate effect. The move comes as quite a surprise as Flint has been in the role for less than 18 months and no reason was given. The bank will now start the search for his replacement and the head of the commercial banking division will be interim CEO.
Meanwhile, the interim results showed adjusted interim pre-tax profits up 7% to $12.5bn and a 23% rise in lending in the bank’s key Asian region. Revenue in the global banking and markets division dropped 3% but the bank said it expected a recovery in the second half. The bank said geopolitical issues could impact a number of its major markets but it maintained its key 11% target for return on tangible equity by 2020. The bank also announced a share buyback of up to $1bn.
When a CEO leaves suddenly with no explanation it is always unsettling for investors, especially in the case of a major global company. There will be a lot of questions to come but the market has taken the news in its stride this morning with the shares recovering quickly from an initial drop. He may not be alone in leaving as there were also reports the bank is considering cutting thousands of more senior roles as it faces a worsening global outlook. It remains a significant dividend payer and offers a decent 6.4% yield so we continue to suggest the shares as a medium risk ‘buy’ for an income geared portfolio, although in the current climate we would favour a drip feed approach.
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