According to the Hong Kong Economic Daily, the whole city focused on HSBC's (00005) annual results, but the earnings performance and buyback announcement disappointed the market. After the results were exposed at noon yesterday, the share price fell more than 3% from its high. In the afternoon, the London share price also fell as low as HK $79.35, which was 1.60 yuan lower than the Hong Kong closing price of 80.95 yuan, and then gradually stabilized.
Chief Executive Stephen Gulliver explained at the last performance press conference during his term of office that without regulatory requirements, the group could not carry out repurchase until it had completed the issuance of additional tier one capital (AT1) bonds; the target was to complete the bond issue of US $7 billion in the first half of the year, and then review market conditions and regulatory approval, emphasizing that the buyback plan would remain unchanged, and hinted that there would be another related announcement when the first-half results were announced from July to August.
The annual dividend of 51 cents will remain unchanged this year.
As for the driving force of future growth, Gulliver pointed out: "in the past, the problem of US regulators' fines of US $15.3 billion eroded (chopped away) profits ended, while global interest rates also entered an upward cycle from near zero levels in the past, from adversity to prosperity in operation, and confident groups can enter the growth trajectory." McRongen, the finance director, also pointed out that every 25 pips of interest rate hikes in the United States could boost group revenue by $2.2 billion, more than the $1 billion forecast in 2016.
Brokerages Goldman Sachs and Morgan Stanley both pointed out that HSBC's performance was slightly lower than expected, coupled with the lack of a new round of repurchase amount and timetable, it is believed that the share price will be under pressure in the short term. Goldman Sachs believes that the fundamentals of HSBC remain unchanged and expects to announce an one-off $3 billion buyback in the second half of the year, maintaining the buy rating and the target price of 84 yuan. Morgan Stanley said that the management is satisfied with the capital level and is confident that the buyback plan will remain unchanged and maintain the overweight rating and the target price of 89 yuan.
HSBC's full-year results were slightly lower than expected, with pre-tax earnings rising 141 per cent to US $17.2 billion (about HK $134.2 billion), slightly lower than the median forecast of 151 per cent, while the final dividend remained unchanged at 21 cents. The full-year dividend was 51 cents (about HK $3.978) as management had earlier pointed out. HSBC announced yesterday that the full-year 2018 dividend would remain at 51 cents and the common equity tier one capital ratio (CET1) remained at a high level of 14.5 per cent.
Fan Ning, the retired president of Gulliver, will take over today.
HSBC's Hong Kong shares fell 4.8 per cent from a high of Rmb85 to Rmb80.95 yesterday afternoon, down 3.1 per cent for the whole day. London shares also fell as low as HK $79.35, a further Rmb1.60 below Hong Kong's closing price, to HK $80.20 at the end of the day, while American depositary securities (ADR) were at HK $80.80 as of 00:00 this morning.
As for the stock price performance, Gulliver pointed out:'do not worry about the one-day volatility at all. I believe it is only profit-taking after the stock price has risen by nearly 30% in the past year.' He reiterated that he is confident that the group will embark on the growth track and can continue to strive for returns for shareholders.
Mr Gulliver completed his tenure as chief executive of HSBC yesterday, and the new chief executive, John Flint, officially took office today. Management said that the plan to use capital, including repurchase, to return to shareholders remains unchanged. In addition to buybacks, HSBC will also use capital to invest in businesses with growth potential. Management pointed out at an analyst meeting yesterday that over the past three years, $5.7 billion has been invested in technology, of which the three largest markets account for $2.3 billion. In the future, HSBC will continue to invest in technology and focus on areas where income is driven by growth.