# HSBC puts 2022 buyback ambitions on ice as inflation accelerates Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2022-04-26 Category: NEWS Category URL: https://financedigest.com/category/news Meta Title: HSBC Halts Stock Buybacks Amid Capital Concerns Meta Description: HSBC shelves buyback plans after capital decreases due to inflation, geopolitical tensions, and economic challenges. Share prices drop 3.6%. URL: https://financedigest.com/hsbc-puts-2022-buyback-ambitions-on-ice-as-inflation-accelerateshtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2022-04-26t065132z3lynxnpei3p03rrtroptp4hsbc-results-1736815829082-compressed.jpg) By Anshuman Daga and Lawrence White SINGAPORE/LONDON (Reuters) -HSBC has shelved plans for new stock buybacks this year after reporting an unexpected hit to its capital on Tuesday, as a cocktail of rising inflation, geopolitical tensions and economic weakness dented its prospects. Shares in Europe’s biggest bank were trading 3.6% lower by 1014 GMT against a 0.8% gain in the benchmark FTSE 100 index, as investors reacted to revised payout plans, which compounded disappointing news on the bank’s balance sheet. HSBC’s core capital ratio, a key measure of a bank’s financial strength, fell 1.7 percentage points to 14.1% from the end of 2021, driven in part by losses on a hedging strategy it has [set up in advance of expected central bank rate hikes](https://www.financedigest.com/bank-of-england-set-to-hike-to-4-as-rate-peak-looms.html "Bank of England set to hike to 4% as rate peak looms"). Capital “is still a very strong level, but an eyebrow raiser nonetheless,” said Simon Peters, investment [strategist](https://www.financedigest.com/invest-in-infrastructure-to-escape-the-starvation-cycle-warns-leading-nonprofit-sector-strategist.html "Invest In Infrastructure To Escape The ‘Starvation Cycle’, Warns Leading Nonprofit Sector Strategist") at Algebris Investments. The bank’s capital will be further sapped when it books a loss of around $2.7 billion in the second half of the year, due to the sale of its France [retail operations](https://www.financedigest.com/iveco-to-transfer-nordic-retail-and-commercial-operations-to-hedin.html "Iveco to transfer Nordic retail and commercial operations to Hedin"). That comes as soaring [energy prices](https://www.financedigest.com/ecb-survey-shows-rising-inflation-expectations-despite-energy-price-falls.html "ECB survey shows rising inflation expectations despite energy price falls") and supply chain outages, partly due to the conflict in Ukraine, threaten to scupper a nascent global economic recovery from the pandemic. HSBC Chief Executive Noel Quinn, who has run the London-headquartered bank for the last two years, is ploughing billions into Asia to drive growth, with a focus on the [wealth management](https://www.financedigest.com/analysis-credit-suisse-collapse-threatens-switzerlands-wealth-management-crown.html "Analysis-Credit Suisse collapse threatens Switzerland’s wealth management crown") business. He has also [moved global](https://www.financedigest.com/analysis-at-world-cup-saudi-crown-prince-moves-back-on-to-global-stage.html "Analysis-At World Cup, Saudi crown prince moves back on to global stage") executives there. Pretax profit of $4.17 billion for the first quarter [ending on March](https://www.financedigest.com/tennis-panic-attack-ends-tsurenkos-indian-wells-as-raducanu-marches-on.html "Tennis-Panic attack ends Tsurenko’s Indian wells, as Raducanu marches on") 31, was down from $5.78 billion a year earlier, but beat the $3.72 billion average estimate of 16 analysts compiled by HSBC. In February, HSBC, which earns about two-thirds of its reported pretax profit from Asia, brought forward its key profitability target by a [year](https://www.financedigest.com/crop-merchant-louis-dreyfus-gets-profit-boost-in-volatile-year.html "Crop merchant Louis Dreyfus gets profit boost in volatile year") and more than doubled its annual profit as expected bad loans from the pandemic failed to materialise. HSBC’s revenues fell 3%, in part due to COVID-19 restrictions in the [bank’s biggest market](https://www.financedigest.com/hsbc-appoints-new-markets-head-amid-wider-investment-bank-reshuffle.html "HSBC appoints new markets head amid wider investment bank reshuffle") of Hong Kong as its branches were closed, hitting its sales of investment products. But Chief Financial Officer Ewen Stevenson told reporters the bank remained “massive bulls” on growth in the region and had no [plans to change](https://www.financedigest.com/exclusive-olympics-paris-2024-plans-games-relay-changes-fewer-torches-source.html "EXCLUSIVE-Olympics-Paris 2024 plans Games relay changes, fewer torches-source") strategy there. VOLATILITY PAIN The lender blamed volatility in the value of some government and corporate bonds it holds as hedges against dips in interest income for its capital hit, a trend Stevenson said could continue this year for [HSBC and other banks](https://www.financedigest.com/hsbc-acquires-british-arm-of-stricken-silicon-valley-bank.html "HSBC acquires British arm of stricken Silicon Valley Bank"). Those [investments will eventually result in a positive return for the bank if rate hikes proceed as expected](https://www.financedigest.com/uks-dominos-expects-tech-investments-to-hit-2023-profit.html "UK’s Domino’s expects tech investments to hit 2023 profit"), Stevenson told Reuters. HSBC meanwhile is “not considering” breaking itself up, Stevenson told reporters, after [media reports that an anonymous shareholder had recommended the oft-discussed move to unlock the value of the bank’s component businesses](https://www.financedigest.com/ladbrokes-owner-entain-buys-sports-media-business-365scores.html "Ladbrokes owner Entain buys sports media business 365scores"). The bank said [expected credit losses](https://www.financedigest.com/dollar-set-for-weekly-loss-amid-expectations-fed-will-slow-hikes.html "Dollar set for weekly loss amid expectations Fed will slow hikes") came in at $600 million in the first quarter, less than expected. In the same period last [year it unlocked $400 million of reserves as the outlook](https://www.financedigest.com/uk-to-avoid-recession-this-year-but-outlook-still-weak-bcc-says.html "UK to avoid recession this year but outlook still weak, BCC says") improved. The swing to a [net credit loss mainly reflected the impacts of the Russia-Ukraine conflict and inflationary pressures on the forward economic outlook](https://www.financedigest.com/recruiter-hays-boosted-by-record-net-fees-but-cautious-on-outlook.html "Recruiter Hays boosted by record net fees, but cautious on outlook"), the bank said. On Tuesday, Swiss wealth titan UBS reported a 17% rise in [quarterly net profit](https://www.financedigest.com/ericssons-quarterly-core-profit-misses-expectations.html "Ericsson’s quarterly core profit misses expectations") to its best since 2007 on the back of strong trading. HSBC’s smaller rival [Standard Chartered](https://www.financedigest.com/first-abu-dhabi-bank-reiterates-not-eyeing-offer-for-standard-chartered.html "First Abu Dhabi Bank reiterates not eyeing offer for Standard Chartered") reports results on Thursday, followed by Southeast Asian banks such as DBS Group on Friday. [HSBC also holds its annual shareholder](https://www.financedigest.com/hsbc-board-recommends-shareholders-vote-against-spin-off-resolution.html "HSBC board recommends shareholders vote against spin-off resolution") meeting in London on Friday. [(Reporting by Anshuman Daga and Lawrence White; Editing by Sinead Cruise, Edmund Blair and Jane Merriman)](https://www.financedigest.com/white-bullet-releases-ad-funded-piracy-report-for-world-intellectual-property-organisation-wipo.html "White Bullet releases Ad Funded Piracy Report for World Intellectual Property Organisation (WIPO)") --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---