HSBC Says It Will Buy Back $2 Billion in Stock as Profit Jumps

Global banking giant HSBC HSBC 0.07% Holdings PLC said it would buy back up to $2 billion in stock after its third-quarter net profit jumped, as the lender released more provisions it had previously made for bad loans.

The London-based bank, which makes most of its profit in Hong Kong and mainland China, earned $3.54 billion in the three months to the end of September, up from $1.36 billion in the same period last year.

Analysts had expected the banking giant to report profit of $2.22 billion for the quarter. Revenue was mostly flat at $12 billion.

HSBC said it reduced its provisions for bad loans by $659 million during the third quarter. A year ago, it had recorded $785 million in expected credit losses when concern about the economic impact of the coronavirus pandemic forced banks world-wide to prepare for massive loan losses.

Many of those losses haven’t materialized. As the global economy recovers, lenders have been releasing past provisions and setting aside less for current loans, which boosts their profits.

“While we retain a cautious outlook on the external risk environment, we believe that the lows of recent quarters are behind us,” HSBC Chief Executive Noel Quinn said in a statement. That, along with the group’s “strong capital position,” enabled HSBC to announce a share buyback of up to $2 billion that will commence soon, he added.

HSBC is sharpening its focus on lucrative Asian markets and agreed to sell its French and U.S. retail banking operations earlier this year. It earned a pretax profit of $1.77 billion in Hong Kong, down 6.5% from the third quarter of 2020, due mainly to lower net interest income in the recent period.

Pretax profit from mainland China rose 45% from a year ago to $749 million in the quarter, while that at HSBC’s U.K. bank more than doubled year-over-year to $1.49 billion.

HSBC’s strategic shift to Asia has been hampered by geopolitical tension between China and Western nations. Some U.S. and U.K. politicians rebuked the bank for not publicly criticizing China’s imposition of a new national security law in Hong Kong. Mr. Quinn told U.K. politicians in January that it wasn’t his job as a banker to oppose Chinese policies.

HSBC’s shares have risen about 15% this year, underperforming large London-based banks such as Barclays PLC and Lloyds Banking Group.

The bank last month paid out an interim dividend of $0.07 a share for the first half of 2021. HSBC said Monday that it won’t pay quarterly dividends this year, but will review whether to do so by the time it reports its full-year results in February 2022.

Write to Simon Clark at [email protected] and Elaine Yu at [email protected]