HSBC mulls its first-ever share buy-back programme

Top management to seek shareholders approval for buy-back authority which, if invoked, would be the first time in bank’s history

PUBLISHED : Monday, 18 April, 2016, 9:35pm
UPDATED : Monday, 18 April, 2016, 9:35pm

With HSBC’s shares having tumbled 30 per cent from a year ago, and currently trading below the lender’s asset value at just 0.66 times price to book, top management is mulling a buy-back programme to quell disgruntled shareholders who are increasingly unhappy with its share performance and mounting provisions for lawsuits.

At its annual general meeting in London this Friday, HSBC will seek shareholders’ approval to renew its authority to buy back shares, despite the bank having never invoked that right in its history, according to HSBC Chairman Douglas Flint.

The mandate will allow the bank to buy back up to 1.97 billion shares at a price no more than 105 per cent above the five-day average price for its shares traded in Hong Kong or London. HSBC’s shares closed at HK$48.95 on Monday.

“From a corporate finance point of view, if you are trading below book, you should try and buy back shares at that point in time. There is some complexity around regulation. But it’s something we are studying. You are spot on. This is absolutely the time we should,” said HSBC chief Stuart Gulliver in response to a shareholder’s question at an informal meeting with Hong Kong shareholders on Monday ahead of the Friday meeting.

Flint, the outgoing chairman of the London-based lender added: “We have never used that authority. One of the issues we have to deal with is the lack of clarity as to what the final capital position of the group is going to be. There are a number of very important and significant papers and consultation papers issued by Basel in relation to capital requirements for lending and for capital markets activities – which we need to fully understand as we appraise the appropriate amount of capital.”

Shailesh Raikundia, banking industry analyst at Haitong Securities in London, however, is sceptical. “[A buy back is] talked about at some point. It all depends. Shareholders are already convinced by the full dividends payout. It’s really too early for such a move.”

At the Friday meeting, HSBC shareholders will also be asked to confirm the election of three new recently appointed board members. One of the three, Henri de Castries, most recently the chairman and chief executive of AXA who joined the HSBC board in March, is tipped as the most likely candidate to succeed Flint as the first outsider to serve as HSBC’s chairman. de Castries, a French aristocrat, is the fifth count of the de Castries line.

The refreshment of the management has already started
HSBC Chairman Douglas Flint

The new chairman will oversee the nomination committee to find a candidate to succeed Stuart Gulliver as the next HSBC chief executive. Gulliver, who became the bank’s CEO in 2011, will see his term likely expire by 2018.

“The board has started the process to select a chairman whom we expect to be in a position to announce sometime next year,” Flint said. “The refreshment of the management has already started. This bank is in very good management under Stuart Gulliver’s leadership... [who] has 100 per cent support of the board. And I don’t think we’d be in as good position today without his leadership and his personal commitment.”