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HSBC tops earnings estimates, announces $2 billion share buyback

Key Points
  • HSBC said pre-tax profit for the first half of 2017 rose 5 percent year-on-year to $10.24 billion, beating average estimate of $9.5 billion
  • The bank, largest in Europe, also announced a $2 billion share buyback for the second half of 2017
Logo of HSBC bank
Adam Jeffery | CNBC

HSBC, Europe's largest bank, reported a set of financial results that beat estimates in the first half of 2017 and announced a $2 billion share buyback on the back of a growing capital base.

The bank said its pre-tax profit for the first half of 2017 came in at $10.24 billion, 5 percent higher than a year ago and beating the $9.5 billion average estimate by analysts polled by the bank. Adjusted revenue was at $26.1 billion.

"In the past 12 months we have paid more in dividends than any other European or American bank and returned $3.5 billion to shareholders through share buy-backs. We have done this while strengthening one of the most resilient capital ratios in the industry," Stuart Gulliver, HSBC group chief executive said in a statement.

The bank was widely expected to announce that it would buy back its own shares at between $1.5 billion to $4 billion in the second half of 2017, market watchers had said.

It had disappointed markets with just a $1 billion share buyback plan in the first six months of the year, after spending $2.5 billion doing so last year in a bid to wind down its cash stockpile.

"We expect a buyback of $2.5 billion to be announced for 2H17 — a lower figure would be seen as a disappointment we think," Deutsche Bank analysts wrote in a note.

Monday's announcement, the $2 billion share buyback, fell short of that mark.

HSBC's latest set of financial results and buyback plan will support the bank's share price further, said Jackson Wong, associate director at Huarong International Securities. The shares, a heavyweight on the , have risen 23 percent this year as of Friday's close.

"The price is not very cheap right now, but I think investors who have this stock should keep holding to it," he told CNBC's "Capital Connection."

Wong added that the rising interest rates environment bodes well for HSBC, which is one of the most rate-dependent banks.

Not the time to buy HSBC stock: Expert

But Ronald Wan, chief executive of investment banking at Partners Capital International, said investors should be cautious of Brexit developments and upcoming management changes at HSBC.

The bank's long-time chairman Douglas Flint will be succeeded by former AIA chief executive Mark Tucker, who will lead a search for a new chief executive.

"I think the buyback plan can help to lift their share price and enhance their earnings-per-share, it is one of the most important factors to drive up the shares and many investors are expecting a lot from it," Wan said on CNBC's "Street Signs."

"(But) investors need more than share buyback and cost cuttings, they need to look at the company's new strategies to bring earnings to the next level," he added.