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(Alliance News) - HSBC Holdings on Monday reported a sharp rise in profit in the third quarter, with Chief Executive Noel Quinn declaring the lender's Covid troubles are behind, emboldening the lender to embark on a USD2 billion share buyback.
HSBC shares were up 0.4% in London early Monday.
China-focused HSBC had a tumultuous 2020 as its fortunes took a hammering from both the coronavirus and simmering geopolitical tensions.
Quinn has overseen a dramatic restructuring, slashing the bank's workforce by about 35,000 and refocusing on its most profitable areas in Asia and the Middle East, a tactic he said was now paying dividends.
In the three months to September 30, the bank reported pretax profit of USD5.40 billion, up sharply from USD3.07 billion the year before.
HSBC benefited from a USD659 million expected credit benefit compared to a USD785 million charge a year before.
Shore Capital said the results showed better-than-expected profitability due to the net provision release.
Shore said the share buyback was a surprise, the broker saying it expected HSBC to wait until next year to do this. Shore did note the share buyback is relatively small for a company of HSBC's size, representing less than 2% of market capitalisation.
"On balance, we think there is more to like than not in these results," commented Shore research analyst Gary Greenwood.
HSBC CEO Quinn said: "We had a good third-quarter performance, with strong growth in profits supported by additional credit provision releases. Our strategy remains on track, with good delivery in all areas. This was reflected in more consistent top-line growth, robust lending pipelines across our businesses, and rising trade and mortgage balances.
"While we retain a cautious outlook on the external risk environment, we believe that the lows of recent quarters are behind us. This confidence, together with our strong capital position, enables us to announce a share buyback of up to USD2 billion, which we expect to commence shortly."
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: up 0.3% at 7,226.49
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Hang Seng: marginally lower, down 4.00 points at 26,122.93
Nikkei 225: closed down 0.7% at 28,600.41
DJIA: closed up 73.94 points, or 0.2%, at 35,677.02
S&P 500: closed down 4.88 points, or 0.1%, at 4,544.90
Nasdaq Composite: closed down 125.50 points, or 0.8%, at 15,090.20
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EUR: unchanged at USD1.1650
GBP: flat at USD1.3770 (USD1.3773)
USD: soft at JPY113.64 (JPY113.68)
GOLD: down at USD1,797.78 per ounce (USD1,809.80)
OIL (Brent): up at USD86.14 a barrel (USD84.77)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Monday's Key Economic Events still to come
Ireland October bank holiday.
1000 CEST Germany Ifo business climate index
0930 CDT US Texas manufacturing outlook survey
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Tens of thousands of people in northern China were placed under strict stay-at-home orders on Monday as authorities sought to stamp out a growing Covid outbreak in the run-up to the Beijing Winter Olympics. Residents of the Chinese capital were also advised not to leave the city unless necessary, although regular transport services out of the city continued as normal. China reported 39 new cases on Monday, bringing the tally from the latest Delta variant-linked outbreak to more than 100 cases over the past week. The numbers are extremely low compared with most other places in the world, but China has pursued a zero-case strategy throughout the pandemic and authorities are determined to stamp out the latest outbreak with the Winter Olympics just over 100 days away.
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After months of fierce political wrangling, US House Speaker Nancy Pelosi said Sunday she expects agreement on a huge social spending package and a vote on a cross-party infrastructure bill this week, adding: "We're almost there." US President Joe Biden had been intent on securing passage of the two mega-measures – which Democrats see as vital to their party's political hopes in midterm elections next year – before he leaves for a climate summit in Glasgow that opens October 31. And the White House noted "progress" was being made as Biden met with a key member of his party Sunday, a sentiment shared by the top Democrat in Congress. Asked on CNN's "State of the Union" whether the agreement on the spending package and votes on infrastructure could occur in the coming week, Pelosi replied, "that's the plan."
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Around half of people in UK are already planning overseas holidays next year, a survey has found. Spain topped the intended destination list, followed by Greece, France, Italy, the US and Portugal, according to American Express. A fifth of people had already started making bookings. Among those who have not yet booked, the most common reason was that they are waiting to see how the coronavirus pandemic progresses.
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BROKER RATING CHANGES
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CITIGROUP RAISES SHELL PRICE TARGET TO 1,710 (1,430) PENCE - 'NEUTRAL'
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STIFEL RAISES EASYJET TO 'HOLD' (SELL) - PRICE TARGET 600 (650) PENCE
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CITIGROUP CUTS CARNIVAL PLC TO 'NEUTRAL' ('BUY') - TARGET 1,750 (2,450) PENCE
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COMPANIES - FTSE 100
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Tesco's website and app are up and running again after a suspected hack. The outage, which left customers struggling to shop for groceries or track orders, began on Saturday morning and continued into Sunday. The supermarket said the problem was due to an attempt to "interfere" with its systems, but added there was "no reason" to believe customer data was affected.
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COMPANIES - FTSE 250
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Online trading platform Plus500 said that it maintained strong operational momentum in the third quarter and that it was well positioned to access significant growth opportunities. For the three months to September 30, revenue was USD211.4 million, down 2.3% from USD216.4 million in the third quarter last year. Third quarter earnings before interest, tax, depreciation and amortisation was USD128.6 million, down 4.2% from USD134.2 million the year before. During the period, Plus500 added 26,169 new customers to its platform, down 43% from 46,238 last year. Average revenue per user was USD1,517, down 26% from USD2,061, while average user acquisition cost rose 33% to USD1,416 from USD1,066. The company said its new share dealing platform, 'Plus500 Invest', is now operational in a number of countries in Europe. Going forward, Plus500 said it is making substantial investments to build its position in the US retail trading market in futures and options on futures and to support launches of Plus500 Invest in more European countries over the coming quarters. Looking ahead, Plus500 said annual 2021 revenue and Ebitda to be ahead of current compiled analysts' consensus forecasts. "The board's confidence about the outlook for Plus500 is further bolstered by the significant strategic and operational investments now being made by the company, enabled by the group's strong financial position and cash generative and scalable business model. While these investments will moderately impact Ebitda margin over the coming quarters, they will enable the group to deliver sustainable growth over the medium to long term," Plus500 said.
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Coal, gas, solar and wind power plants operator ContourGlobal reported a rise in earnings for the first nine months of the year and reiterated its annual guidance. In the nine months to September 30, revenue rose 46% to USD1.48 billion from USD1.02 billion a year before. Adjusted Ebitda was USD622 million, up 14% from USD543 million. ContourGlobal declared a 4.465 US cents dividend for quarter to September 30, saying this met its target of 10% annual growth. Looking ahead, ContourGlobal maintained its 2021 adjusted Ebitda guidance of USD780 million to USD810 million.
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COMPANIES - OTHER UK
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Co-operative Bank confirmed a weekend press report which said the lender was exploring the potential purchase of TSB Banking from Spain's Banco de Sabadell. On Sunday, Sky News reported that Co-operative Bank contacted Sabadell earlier this month over a potential deal. According to Sky, Co-op would be willing to pay in excess of GBP1 billion for TSB. Co-operative Bank on Monday acknowledged that a letter was sent but said that no discussions about the idea are currently taking place with Sabadell.
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COMPANIES - GLOBAL
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Australian telecommunications firm Telstra will buy Digicel Pacific for an initial USD1.6 billion, in a government-supported move reportedly aimed at shutting out China-backed players from acquiring the regionally dominant company. Telstra announced Monday it had received USD1.3 billion in funding from Canberra to buy the South Pacific's leading mobile and internet provider, which operates in Papua New Guinea, Vanuatu, Fiji, Tonga, Samoa and Nauru. Australia's government said the deal reflected its "Pacific Step-Up" commitment to support the development of secure and reliable infrastructure in the region, AFP reported. "This is fundamentally in the interests of both Australia and our Pacific family," a foreign and trade ministries joint statement said. Telstra, which will contribute USD270 million of equity toward the purchase price, said the deal presents a "unique commercial opportunity". Kingston, Jamaica-based Digicel Group Holdings said it sold Digicel Pacific, a wholly owned subsidiary, to Telstra for up USD1.85 billion, including a three-year USD250 million earn-out. Digicel, led by Founder & Chair Denis O'Brien said the deal is expected to be completed in the first quarter of 2022. The business recorded adjusted earnings before interest, tax, depreciation and amortisation of USD222 million in the financial year that ended March 31 on revenue of USD450 million.
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Negotiations between the Italian government and the major bank UniCredit on the sale of the ailing lender Monte dei Paschi di Siena have collapsed. Despite efforts by both sides, the negotiations would no longer continue, said a Sunday statement by UniCredit and Italy's Ministry of Economy & Finance. Monte dei Paschi needs EUR7 billion before the business is transferred to UniCredit. This amount is reportedly three times as much as previously forecast by the MEF. Monte dei Paschi, an Italian bank with a long history and a troubled present, is considered the biggest restructuring case in the Italian banking sector. The Italian government, which took a majority stake of the ailing bank in 2017, must hand over its stake by the end of the year at the behest of the EU.
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Monday's Shareholder Meetings
Bezant Resources PLC - AGM
Galileo Resources PLC - AGM
Hyve Group PLC - GM re directors remuneration policy
Xaar PLC - GM re revised call option
Xtract Resources PLC - AGM
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By Tom Waite; thomaslwaite@alliancenews.com
Copyright 2021 Alliance News Limited. All Rights Reserved.
