Shares in HSBC (LON:HSBA) fell in early trade despite the bank beating Q2 forecasts and restarting its buyback programme. The company also raised its forecast for FY banking net interest income, but it fell short of market expectations.
Shares down despite Q2 beat
For the three months to June, HSBC posted a 60% increase in pre-tax profit to $10.1 billion. That beat the consensus forecast of $9.5 billion, but the result was helped by $2.6 billion of ‘notable items’.
Total revenue increased by $2.6 billion or 16% to $19.1 billion against the consensus of $18.6 billion. Once again, there was a net favourable impact of $1.3 billion from ‘notable items’.
Digging into the numbers, net interest income of $9.3 billion was considerably below the consensus of $11.5 billion. Conversely, fee and ‘other’ operating income reached $9.8 billion, well above the consensus of $7 billion.
For FY26, the bank raised its banking net interest income target to ‘at least $46 billion’. However, this also disappointed the market as analysts had pencilled in close to $47 billion.
On a positive note, the board approved a share buyback of up to $1 billion over the next three months. Share repurchases were halted last year due to the buyout of minority investors in Hang Seng Bank.
There are no two ways about it, these are disappointing results for a bank of HSBC’s quality. Net fee income is way short of where it should be and there are too many ‘notable items’ boosting profits.
The share buyback is a positive, as there were no guarantees, but $1 billion is a drop in the ocean. HSBC has a market cap of $368 billion (£274 billion) so we’re talking 0.3% of the equity.
The shares have gained 35% this year, adding over $100 billion (£75 billion) in value. That now looks disproportionate, and we’re not not surprised analysts at JPMorgan, RBC etc aren’t upgrading their neutral view.
