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HSBC (HSBA.L) has launched its planned $1bn share buyback, as it seeks to reward shareholders as its largest investor calling on the lender to split its Asian and western operations.
Europe’s largest bank has appointed Merrill Lynch International to conduct the process, which could see as many as 2 billion HSBC ordinary shares cancelled in a move that should lead to a boost in average earnings per share.
Merrill Lynch will make trading decisions in relation to the buyback independently of HSBC and will purchase shares ‘on exchange’, the bank said. The process is due to end on August 31.
HSBC is taking a more muted line compared to rivals as it will follow through on earlier buyback promises but warned that more were unlikely this year.
HSBC said it would put plans for a 2022 buyback programme on ice after reporting a larger than expected hit to capital reserves driven by rising inflation and geopolitical tension.
Over the quarter the bank’s core Tier 1 capital ratio, a key measure of a bank's financial strength, fell from 15.8% to 14.1%, and warned it could dip below its 14%-to-14.5% target range this year.
Standard Chartered plans to buy back shares of up to $750m in 2022, while Lloyds and NatWest Group announced repurchase programs of as much as £2bn and £750m, respectively.
HSBC boss Noel Quinn is also under pressure after Ping An urged the bank’s board to spin off its Asia business in a bid to improve returns.
Ping An wants HSBC to undertake an overhaul that would result in the market giving the bank more credit for its large Asian business, and make those operations less beholden to regulators in London.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: "HSBC shareholders are pretty sanguine today about the calls for the bank to be split up and its Asia business hived into a separate entity with shares rising.”
HSBC's profits fell by 28% in the first three months of the year as the lender was hit by provisions for souring loans in Russia.
Watch: Why some investors are banking on an HSBC breakup