HSBC announces $1bn share buyback as 2016 profit falls 62%

HSBC Holdings said on Tuesday that it will buy back an additional $1bn worth of shares as it announced a 62 per cent tumble in profits to $7.1bn for 2016, hit by one-off costs and write-offs.

Adjusted pre-tax profits of $19.3bn for the year were down about 1 per cent from the year before.

Europe’s largest lender held its annual dividend at $0.51 per share, the same rate paid out last year, stating the bank was “confident of maintaining at this level”.

The share buyback, following a similar action announced last year to buy $2.5bn shares, was lower than some analysts expected. Analysts at Deutsche Bank and UBS had predicted that HSBC would buy back between $2.5bn-$3bn shares in 2017.

Reported profits were hit by a number of significant events including a $3.2bn impairment of goodwill to its private banking unit in Europe and the cost of achieving targets, which hit $3.1bn last year.

Changes in credit spreads also hurt profitability last year, with the bank claiming an adverse fair value movements of $1.8bn.

“This decline principally reflected the impact of significant items, most of which had no impact on capital, even though they were material in accounting terms,” the bank’s chairman Douglas Flint said in a statement on Tuesday.

The write-offs regarding HSBC’s private bank were largely complete, chief executive Stuart Gulliver said in the statement.

The bank’s shares have steadily climbed since the UK voted to leave the European Union in late June. In Hong Kong, HSBC traded at HK$68.5 on Tuesday morning before results were posted, up about 35 per cent since the Brexit vote. Shares in London were up 57 per cent during the same period.