HSBC Shares Rise as CEO Announces Exit

Busy first-quarter update contains news on dividends, buybacks and the departure of Noel Quinn after 37 years at the bank

Alliance News 30 April, 2024 | 2:31PM James Gard
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Shares in HSBC (HSBA) rose 4% on Tuesday as the bank unveiled a new buyback and special dividend, consensus-beating results and announced that the chief executive intends to step down.

Noel Quinn informed the bank’s board of his intention to retire from the bank after nearly five years leading the company, and 37 years at the firm in total. Quinn said he plans to "pursue a portfolio career" going forward.

"We don’t think this necessarily implies any difficulty for HSBC in the future with the bank on firmer footing and focused in regions and areas where it has market leadership. Cost-cutting and sales of noncore assets have largely been completed," says Morningstar analyst Lorraine Tan. 

Pretax profit was $12.65 billion, 1.8% lower than the prior year's $12.89 billion, but ahead of $12.61 billion consensus. HSBC noted the figure included a $4.8 billion gain following the disposal of its Canadian banking business, which was partially offset by a $1.1 billion impairment related to the sale of its business in Argentina.

First-quarter net interest income fell 3.4% to $8.65 billion (£6.91 billion) from $8.96 billion year on year, though came in higher than company-compiled consensus of $8.50 billion. Net operating income increased 1.5% to $20.03 billion from $19.74 billion.

The company's shares rose nearly 5% to just below 700p on Tuesday. Morningstar has just raised its fair value for the stock to 872p per share.

In dividend news, HSBC said it has approved a first interim payout of $0.10 per share, up year on year from $0.09. It will also pay a special dividend of $0.21 following the sale of its Canadian banking business. In addition, it announced a new share buyback of up to $3 billion, following the conclusion of the $2 billion buyback announced with its full-year results.

"Given our assumptions, we think HSBC still has room to make additional share buybacks with the common equity Tier 1 (CET1) ratio estimated to range between 14% and 15% in our 10-year forecast," adds Tan.

"We think HSBC could afford to pay back more to shareholders. However, given the declining NIM outlook, we maintain our forecast of a net 2% reduction in shares post-2024, below the 3% estimated for this year. With the dividend and share buyback, we see CET1 at around 14% in 2024."

Key Morningstar Metrics for HSBC Stock

• Fair Value Estimate: 850 GBX
• Morningstar Rating: 4 stars
• Morningstar Economic Moat Rating: None
• Morningstar Uncertainty Rating: Medium

HSBC Searches for a New CEO

HSBC said Quinn has informed the board of his intention to retire from the bank after nearly five years leading the company, and 37 years at the firm in total. Quinn said he plans to "pursue a portfolio career" going forward.

Chair Mark Tucker said praised Quinn's "significant contribution" to the firm.

"He has driven both our transformation strategy and created a simpler, more focused business that delivers higher returns. The bank is in a strong position as it enters the next phase of development and growth," Tucker said.

A formal process to find Quinn's successor has begun, with HSBC considering both internal and external candidates. Quinn will continue as CEO during the process, the firm said.

The company left guidance unchanged from that provided in February with the annual results. It continues to target a return on average tangible equity in the mid-teens for 2024, excluding notable items. It expects banking net interest income of at least $41 billion.


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