HSBC announces profit increase, share buyback in signs of turnaround

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HSBC announced on Monday in a statement that its profit grew by 5 percent in H1. According to the statement, HSBC had its third share buyback this year indicating continued progress in the six-year turnaround plan of Europe's biggest bank.

Like other global banks, HSBC has spent many years recovering from the 2008 financial crisis through expanding its empire with a string of acquisitions. Along with cutting jobs and selling assets worldwide to shrink the group’s inputs, the company is finally back to profit and, maintain dividend payouts in an era of stricter banking regulations to some extent.

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What’s HSBC achieved?

Under the bank’s legacy of improving revenue and returning more capital to shareholders, HSBC focused on trimming the bank's empire and shifting its priority market in Asia.

According to Reuters report, the latest share buyback HSBC has is up to 2 billion US dollar, comes as HSBC uses excess capital to offset the dilutive effect of shares paid out as dividends.

Iain Mackay, HSBC Finance Director believes "the return of capital comes from the fact that the business is very accretive, very profitable ... the dividend is 51 cents for the foreseeable future," Reuters said.

"In the past 12 months we have paid more in dividends than any other European or American bank and returned 3.5 billion US dollar shareholders through share buybacks," Chief Executive Gulliver said in HSBC's earnings statement.

HSBC has kept its dividend payout ratio higher than many peers in recent years, including last year when a slowdown in banks' earnings growth prompted rivals such as Standard Chartered PLC (STAN.L) to withhold payments.

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China venture

According to the statement, HSBC makes over half of its profit in the Asia market, especially in Hong Kong and Chinese mainland markets, in order to well manage HK's company profits and insurance revenue.

For the Chinese market, HSBC established an investment banking joint venture with a state-backed fund, ending a 20-month wait, making it the first such venture in China to be majority-owned by a foreign bank.

The venture will allow HSBC to expand in the world's second largest economy, and achieve its ambition to increase profit from the fast-growing Pearl River Delta region. The venture can also boost HSBC's profit by allowing the bank to underwrite and trade corporate bonds in China's domestic market.

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