HSBC Holdings (LON:HSBA) closed Friday at 1,518.4 pence, up 1.05%, trimming its weekly decline to 0.62%. The bank's resilience stood out against a backdrop of broader weakness in the UK banking sector, as it continued to execute its share repurchase program.
On Thursday, HSBC repurchased 1.481 million of its London-listed shares for £22.25 million, at an average price of 1,502.58 pence per share. The shares are slated for cancellation, reducing the total outstanding to 17.175 billion. This move underscores the bank's commitment to returning capital to shareholders, a strategy that has helped differentiate it from its peers.
Last week, HSBC outperformed the average of four major UK banking rivals—Barclays, Standard Chartered, NatWest, and Lloyds—by roughly 3.35 percentage points. While HSBC slipped 0.62%, the other banks saw losses ranging from 3.14% to 5.38%. This relative strength highlights investor confidence in HSBC's strategic focus on Asian growth and its robust capital returns.
However, this outperformance comes with a premium valuation. HSBC trades at 14.58 times trailing earnings, compared to an average of 11.68 times for its peers—a 24.9% premium. Investors are willing to pay more for HSBC's exposure to Asian markets, its anticipated share returns, and its strong dividend yield of 3.74%.
The buyback is supported by solid first-half results. HSBC reported a 23% increase in pretax profit to $19.5 billion, with revenue climbing 11% to $37.7 billion. Banking net interest income reached $22.9 billion, and the bank reaffirmed its forecast of at least $46 billion for the full year. Return on tangible equity stood at 18.2%, while the CET1 ratio slipped to 14.1%.
Chief Executive Georges Elhedery expressed confidence in the bank's trajectory, stating, "HSBC is becoming the stronger bank we set out to build." The board approved a second interim dividend of 10 cents per share and announced a share buyback program of up to $1 billion, expected to be completed by the third-quarter results.
Analysts remain divided on HSBC's prospects. Goldman Sachs and Bank of America maintain Buy ratings, with targets of 1,860p and 1,720p respectively. However, RBC Capital Markets is cautious, setting a target of 1,375p, below the current price, despite projecting $77.2 billion in dividends and buybacks through 2028. The bank's valuation premium leaves little room for error, especially with rising credit charges and potential rate headwinds.
HSBC's liquidity remains a key attraction; Friday's turnover of £274.1 million ranked it second on TradingView's most-active UK stocks list. However, trading volumes were just 0.62 times the 10-day average, indicating that the activity was more about scale than panic selling.
Investors will watch daily buyback announcements next week, with the 1,502.58-pence threshold serving as a key support level. Staying above this price is seen as positive for the capital-return narrative, while a drop below could shift focus to the valuation premium. HSBC's next results update is scheduled for October 27.
