Analysts at Jefferies see a 50/50 chance that the lender will announce a share buyback at the first-half report on Monday.
At the first quarter results, chief financial officer Ewen Stevenson said HSBC would announce its decision on 2019 share buybacks at the half year.
Jefferies said it finds HSBC’s hesitation a surprise given that it generated US$2bn excess capital to a self-imposed common tier equity 1 ratio of 14% in the first quarter.
“Whilst any share buy back would be small relative to market cap, a retrenchment would be a bearish signal,” the broker said.
The investment bank expects HSBC to report a pre-tax profit of GBP5.9bn and net income of GBP14.0bn for the second quarter.
HSBC derives most of its profits from Asia so the region’s performance will be a key area of focus. Investors will also want to see an improvement in the US operations, which have been undergoing a restructuring.
In the UK, profit margins have been modest amid competitive pressures in the mortgage market.
HSBC’s three largest rivals – Lloyds Banking Group PLC (LON:LLOY), Barclays PLC (LON:BARC) and Royal Bank of Scotland Group PLC (LON:RBS) – have also been hit by competition in mortgages, which was evident in their first-half numbers published over the past week.
Standard Life Aberdeen needs to ‘stop the rot’ after Lloyds pulls assets
Ahead of its first-half results on Wednesday, Standard Life Aberdeen PLC (LON:SLA) has settled a dispute with Lloyds over a contract to manage GBP100bn worth of assets.
Lloyds has agreed to pay SLA a GBP140mln settlement after severing the fund manager’s contract to run its Scottish Widows portfolio following the merger of Standard Life and Aberdeen.
“Unfortunately Lloyds isn’t the only investor that’s been looking to pull assets from SLA funds in recent years,” said Hargreaves Lansdown equity analyst Nicholas Hyett.
“While strong market performances have kept total assets under management growing, it’s crucial the company stops the rot. Markets don’t rise forever.”
At the end of March, SLA had assets under management and administration of GBP568.9bn, up 3% from the end of December.
A joint venture agreed with Virgin Money in January added GBP3.5bn of assets while the acquisition of Asia-based real estate manager, Orion Partners, added GBP700mln.
In the second quarter, Hargreaves’ Hyett thinks positive news is likely to be driven by the group’s retail platforms, which have continued to see assets grow, and new partnerships with Virgin Money and Phoenix.
Phoenix bought SLA’s insurance arm business for GBP3bn last year. As part of the deal SLA received a near-20% stake in Phoenix.
William Hill hit by betting machines crackdown
Following the cutting of the staking limit to GBP2 in April from what had been GBP100 before, the company said last month that it would have to shut 700 of its shops.
The FTSE 250 bookie had written down the value of its UK retail arm by almost GBP900mln ahead of its implementation, as bosses predicted it would dent profits by as much as GBP100mln a year.
In its July update, William Hill said it had already seen a “significant fall” in gaming machine revenues, as forecast, but it’s thought that many gamblers will have migrated from machines to counters.
The first half will have been “remarkably tough”, predicted broker Peel Hunt, forecasting a 46% fall in underlying earnings (EBITA) as a result of increased investment in the US and betting shop profits reduced by the machines changes.
“There are now 12 US states that have authorised sports betting. Eight are live and we believe that William Hill is operating in seven of them. Eldorado (20% holder in William Hill in the US and 2% holder in the group) has agreed to acquire Caesars. William Hill believes this will bring it access to Caesars’ licences/properties.”
And for the full year, the broker has cut its earnings per share forecast to 8.2p from 9.0p, reflecting greater caution over the acquisition of Sweden’s Mr Green.
UK GDP expected to be flat as Brexit stockpiling impact unwinds
On the macro-economic front, the Office for National Statistics publishes UK economic growth data for the second quarter on Friday.
ING Economics reckons the gross domestic product (GDP) report will be dominated by the “unwinding of the impact of the pre-Brexit stockpiling frenzy of the first quarter”.
“Firms will need to rebuild stocks ahead of the new October Brexit deadline, but in the meantime, many firms will have had little choice but to unwind the inventory they had previously built up,” it said.
“After all, stock is expensive to store (particularly given a lack of warehousing space in the UK) and comes with an opportunity cost.”
In the first quarter, UK GDP growth accelerated to 0.5% from 0.2% in the previous three months, helped by unprecedented stockpiling by manufacturers worried about the impact of potential no-deal Brexit.
ING expects flat GDP in the second quarter as the stockpiling effect unwinds.
“We’ll be watching to see if business investment resumes its downward trend, while retail spending also looked fairly lacklustre through the spring,” it said.
“With Brexit noise set to intensity, we don’t expect the Bank of England to move interest rates this year.”
Major announcements expected:
Monday August 5:
AGMs: Premier African Minerals PLC (LON:PREM)
Economic data: UK PMI services, US PMI composite, US ISM non-manufacturing index, Eurozone PMI composite
Tuesday August 6:
Interims: HSBC Holdings PLC (LON:HSBA), Genel Energy PLC (LON:GENL), Intercontinental Hotels PLC (LON:IHG), IWG PLC (LON:IWG), Rolls-Royce Holdings PLC (LON:RR.), Rotork PLC (LON:ROR), Synthomer PLC (LON:SYNT), TP ICAP PLC (LON:TCAP), Zotefoams Plc (LON:ZTF)
Economic data: UK retail sales
Wednesday August 7:
Interims: Glencore PLC (LON:GLEN), Hill & Smith PLC (LON:HILS), Legal & General PLC (LON:LGEN), Morgan Sindall Group PLC (LON:MGNS), Phoenix Group Holdings PLC (LON:PHNX), Spirax-Sarco PLC (LON:SPX), Standard Life Aberdeen PLC (LON:SPX), Ultra Electronics PLC (LON:ULE)
Economic data: Halifax house price index, US consumer credit
Thursday August 8:
Finals: Hargreaves Lansdown PLC (LON:HL)
Interims: Arrow Global PLC (LON:ARW), Aviva PLC (LON:AV.), Coca-Cola HBC PLC (LON:CCH), Hastings PLC (LON:HSTG), Tritax Big Box PLC (LON:BBOX), Telecom Egypt S (LON:TEEG), Temple Bar Investment Trust PLC (LON:TMPL)
Economic data: US weekly jobless claims, RICS UK housing market survey
Friday August 9:
Economic data: China CPI and PPI; UK GDP preliminary second quarter; UK industrial, construction and manufacturing production