HSBC Holdings PLC's (LSE:HSBA, NYSE:HSBC) return to share buybacks was deemed a bit on the small side, despite the Asia-focused lender's stronger-than-expected quarter and improving business momentum.
The FTSE 100's largest company announced a $1 billion buyback alongside a 60% rise in second-quarter pre-tax profit to $10.1 billion.
It was the first buyback since HSBC paused repurchases to fund its acquisition of the remaining shares in Hang Seng Bank in October.
Jefferies analyst Joseph Dickerson called it a "modestly lower buyback than we expected", which "may underwhelm". He had pencilled in $2 billion, a figure he said appeared to match investor expectations, although there was no formal consensus forecast.
UBS had also expected $2 billion. Analyst Jason Napier said he was "surprised" the return was not bigger given the strength of HSBC's first-half performance.
The disappointment looks more about restrained ambition than weak trading, the analysts suggested.
Second-quarter profit excluding notable items beat company-compiled consensus by 5%, as income came in ahead of expectations and operating costs remained in line.
Loans increased 5% at constant currency, led by corporate and institutional banking and the UK business. Wealth income excluding net interest income rose 21%, while net new money increased 8%.
"The direction of travel for consensus estimates looks to be slightly upwards following a 6% PBT beat in Q2 with notable balance sheet growth," Dickerson said.
HSBC also raised expected savings from its restructuring to $2 billion from $1.5 billion. However, management flagged higher variable pay in the second half and investment intended to support revenue growth in 2027.
The bank strengthened its interest income guidance only slightly, from "around" $46 billion to "at least" $46 billion, while leaving its longer-term targets unchanged.
UBS retained its 'neutral' rating and 1,520p target, noting that HSBC is already valued at 2.2 times tangible book value.
Napier said: "In short, HSBC is performing better than consensus forecasts but didn’t deliver the Banking NII or buyback we’d forecast and, with targets unchanged and higher costs flagged won’t, we think, force a market rethink on the financial outlook today."
