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HSBC 3Q Earnings Release, posted on Company News.

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idpickering
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HSBC 3Q Earnings Release, posted on Company News.

#452810

Postby idpickering » October 25th, 2021, 5:43 am

Here; viewtopic.php?p=452808#p452808

I know some HYPers hold HSBC in their HYPs, so this should be of interest to them.

Ian.

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Retracted information re: dividends removed. --MDW1954

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Re: HSBC 3Q Earnings Release, posted on Company News.

#452819

Postby funduffer » October 25th, 2021, 8:10 am

In the release on Investegate, they say they will review whether to revert to quarterley dividends before the finals in Feb 2022:

On 2 August 2021, the Directors approved an interim dividend for the 2021 half-year of $0.07 per ordinary share. The interim dividend was paid on 30 September 2021 in cash in US dollars, or in sterling or Hong Kong dollars at exchange rates determined on 20 September 2021. The Group will not pay quarterly dividends during 2021, but will review whether to revert to paying quarterly dividends at or ahead of its 2021 results announcement in February 2022.


https://www.investegate.co.uk/hsbc-hold ... 00120273Q/

Would be nice if they did.

FD

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Re: HSBC 3Q Earnings Release, posted on Company News.

#452824

Postby Dod101 » October 25th, 2021, 8:20 am

funduffer wrote:In the release on Investegate, they say they will review whether to revert to quarterley dividends before the finals in Feb 2022:

On 2 August 2021, the Directors approved an interim dividend for the 2021 half-year of $0.07 per ordinary share. The interim dividend was paid on 30 September 2021 in cash in US dollars, or in sterling or Hong Kong dollars at exchange rates determined on 20 September 2021. The Group will not pay quarterly dividends during 2021, but will review whether to revert to paying quarterly dividends at or ahead of its 2021 results announcement in February 2022.


https://www.investegate.co.uk/hsbc-hold ... 00120273Q/

Would be nice if they did.

FD


Apart from cash flow, it makes no difference whether they do or not, but I guess it would be a sign of a return to normality if they did.

Dod

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Re: HSBC 3Q Earnings Release, posted on Company News.

#452860

Postby pyad » October 25th, 2021, 10:39 am

Given the improving eps situation this bit was useful, reiterating their previous guidance on the likely payout ratio:

...As signalled at our interim results in August, we now expect to move to within our target dividend payout ratio range of 40% to 55% of reported earnings per ordinary share in 2021...


More painful for div investors is this other quote from the update:

...Given our strong capital position and notwithstanding growth opportunities available to us, we intend to initiate a share buyback of up to $2bn, which we expect to commence shortly...

$2bn down the toilet with no benefit to anyone other than their institutional mates, which could have been ours.

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Re: HSBC 3Q Earnings Release, posted on Company News.

#452937

Postby Dod101 » October 25th, 2021, 2:22 pm

pyad wrote:Given the improving eps situation this bit was useful, reiterating their previous guidance on the likely payout ratio:

...As signalled at our interim results in August, we now expect to move to within our target dividend payout ratio range of 40% to 55% of reported earnings per ordinary share in 2021...


More painful for div investors is this other quote from the update:

...Given our strong capital position and notwithstanding growth opportunities available to us, we intend to initiate a share buyback of up to $2bn, which we expect to commence shortly...

$2bn down the toilet with no benefit to anyone other than their institutional mates, which could have been ours.


That is, given pyad's standing amongst some readers of these Boards, downright misleading and probably totally inaccurate. I have attended more than one AGM of HSBC and spoken to the Finance Director. They have been keen to reduce the number of shares in issue for some time. The evidence is that when they used to offer scrip in lieu of dividends (before Covid they did so) they also made a habit of buying back an equivalent amount of shares in the market. After they resumed paying dividends earlier this year they also announced that there would be no scrip dividend option (no doubt to save the expense of issuing new shares and then buying back an equivalent number) This share buyback (modest by their standards) is just a continuation of this idea, only this time they will end up with fewer shares to the benefit of continuing shareholders. It will modestly help the EPS so I cannot see what pyad has to moan about.

They have lots of spare capital as the CET ratio is reported at 15.9% up 0.3%.

Dod

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Re: HSBC 3Q Earnings Release, posted on Company News.

#452945

Postby scrumpyjack » October 25th, 2021, 3:00 pm

Quite so Dod. If they do return to more normal levels of dividends it saves a lot, in the long term, having reduced the number of shares in issue, and it makes sense to buy back shares when the share price is so depressed (as long as the directors believe in their recovery).

As with the other banks the profits look very healthy but one should bear in mind that much of the profit is the writing back of previous provisions. They all made huge bad debt provisions when Covid struck which have turned out not to be needed so they have written them back.

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Re: HSBC 3Q Earnings Release, posted on Company News.

#452948

Postby Dod101 » October 25th, 2021, 3:09 pm

scrumpyjack wrote:Quite so Dod. If they do return to more normal levels of dividends it saves a lot, in the long term, having reduced the number of shares in issue, and it makes sense to buy back shares when the share price is so depressed (as long as the directors believe in their recovery).

As with the other banks the profits look very healthy but one should bear in mind that much of the profit is the writing back of previous provisions. They all made huge bad debt provisions when Covid struck which have turned out not to be needed so they have written them back.


Thanks. When I read the earnings statement this morning that is what I felt; that it is difficult to sort out the effect of the writing back of provisions previously made against the actual current earnings, at least without a lot of work. They, probably being encouraged by the PRA, took, as it turned out, a much too gloomy a view of the effects of Covid in March 2020, but I guess better that than the other way.

Reverting to my comments re attending AGMs, I find it a very valuable exercise because one can pick up a lot, especially if we get the opportunity to speak to Directors post the event. I hope to resume this practice next spring.

Dod

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Re: HSBC 3Q Earnings Release, posted on Company News.

#452951

Postby monabri » October 25th, 2021, 3:33 pm

20242 million shares (*) ...the share buy back is equivalent to loss of one dividend of 10 cents for one year. Not a significant figure for a business the size of HSBC. However, looking at the number of shares I hold in HSBC and the effective loss of a 10 cent dividend, I'm sort of swinging to Pyad's view in terms of how much nicer the 10 cent per share divi would have been in my pocket.


edit: anyone read through the 140 pages of tabulated data...... ;)






(*) with reference to a previous post.

viewtopic.php?p=450786#p450786

and the dividend data history.

https://www.dividenddata.co.uk/dividend ... ?epic=HSBA

Previous pattern for dividends for a long time being 10 cents for Q1 - Q3 and 21 cents for Q4)

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Re: HSBC 3Q Earnings Release, posted on Company News.

#452960

Postby pyad » October 25th, 2021, 4:08 pm

monabri wrote:...I'm sort of swinging to Pyad's view in terms of how much nicer the 10 cent per share divi would have been in my pocket...


Quite. As usual with buyback discussions, there are one or two turkeys voting for Christmas round here. As an income investor, which presumably is the only reason to hold HSBA on an HYP strategy board, why would you not want an extra 10¢?

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Re: HSBC 3Q Earnings Release, posted on Company News.

#452964

Postby Dod101 » October 25th, 2021, 4:16 pm

pyad wrote:
monabri wrote:...I'm sort of swinging to Pyad's view in terms of how much nicer the 10 cent per share divi would have been in my pocket...


Quite but as usual with buyback discussions, there are one or two turkeys voting for Christmas round here.

I can recall when it was actually illegal for a company in the UK to purchase its own shares.


I assume that I am one of the turkeys that pyad refers to but I am very happy. I too recall when it was illegal for a company to buy back its own shares but what has that got to do with anything? I think that monabri can relax because we are likely to see a decent dividend before too long I think. What I took particular exception to in pyad's earlier comment was his as usual OTT comment about HSBC benefiting 'their institutional mates'. I think that is just a nonsensical and scurrilous comment.

Dod

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Re: HSBC 3Q Earnings Release, posted on Company News.

#452981

Postby Dod101 » October 25th, 2021, 5:49 pm

Clearly the market likes the figures released this morning. I think they may just be on their way after many years of restructuring. Glad I hung on I must say.

Dod

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Re: HSBC 3Q Earnings Release, posted on Company News.

#453041

Postby tjh290633 » October 25th, 2021, 11:00 pm

Dod101 wrote:I can recall when it was actually illegal for a company in the UK to purchase its own shares.

As I understand it, it still is illegal unless the shareholders vote in favour at each AGM.

My thoughts are that an invitation to shareholders to tender their shares is a much better way of returning value. But probably most shareholders prefer to kep their shares.

TJH

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Re: HSBC 3Q Earnings Release, posted on Company News.

#453083

Postby Dod101 » October 26th, 2021, 7:30 am

tjh290633 wrote:
Dod101 wrote:I can recall when it was actually illegal for a company in the UK to purchase its own shares.

As I understand it, it still is illegal unless the shareholders vote in favour at each AGM.

My thoughts are that an invitation to shareholders to tender their shares is a much better way of returning value. But probably most shareholders prefer to kep their shares.

TJH


I think you are correct but I am not making a big issue of it. I was simply responding to pyad.

Dod

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Re: HSBC 3Q Earnings Release, posted on Company News.

#453285

Postby csearle » October 26th, 2021, 5:28 pm

tjh290633 wrote:My thoughts are that an invitation to shareholders to tender their shares is a much better way of returning value.
Please excuse my ignorance Terry but what is this mechanism of which you speak? Is this something which goes by another name that is more familiar (well at least to me), or, is this perhaps something that doesn't happen often such that youngsters (61) like me wouldn't have seen it, or, something else?

Chris

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Re: HSBC 3Q Earnings Release, posted on Company News.

#453304

Postby monabri » October 26th, 2021, 6:39 pm

csearle wrote:
tjh290633 wrote:My thoughts are that an invitation to shareholders to tender their shares is a much better way of returning value.
Please excuse my ignorance Terry but what is this mechanism of which you speak? Is this something which goes by another name that is more familiar (well at least to me), or, is this perhaps something that doesn't happen often such that youngsters (61) like me wouldn't have seen it, or, something else?

Chris


Sounds like a company makes an offer to buy shares off existing shareholders for an agreed, fixed price. Shareholders can elect to accept or decline the offer.

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Re: HSBC 3Q Earnings Release, posted on Company News.

#453358

Postby Gengulphus » October 26th, 2021, 8:51 pm

csearle wrote:
tjh290633 wrote:My thoughts are that an invitation to shareholders to tender their shares is a much better way of returning value.
Please excuse my ignorance Terry but what is this mechanism of which you speak? Is this something which goes by another name that is more familiar (well at least to me), or, is this perhaps something that doesn't happen often such that youngsters (61) like me wouldn't have seen it, or, something else?

I'm pretty certain it's what I've normally seen called a "tender offer".

In its simplest version, the company makes an offer to all shareholders to buy their shares back at a fixed price, by direct communication with registered shareholders (which in the case of nominee brokers' nominee companies is passed on to the broker's clients to those of their clients who own the shares). Shareholders can respond by saying how many of their shares they wish to tender, with that number defaulting to zero if the shareholder doesn't respond; nominee brokers respond with the totals of their clients' responses. The offer also has a limit on the total number of shares the company is willing to buy back, which determines the fraction of the shares in issue that the company wants to buy back. Typically, registered shareholders are guaranteed to have up to that fraction of their shares bought back and can apply to have more bought back, but those 'excess applications' may well be scaled back because they can only be satisfied from the funds not spent due to other registered shareholders tendering fewer shares than they could guarantee to have bought back. Those who hold their shares in nominee accounts may have their 'excess applications' similarly scaled back by their broker (but the outcome might well be a different amount of scaling back to that done by the company, depending on how much the broker's clients' collective applications are in excess of the number of shares they are collectively guaranteed to have bought back).

There are more complex forms - e.g. a company might offer to buy back their shares at a sequence of fixed prices like 120p, 122p, 124p, 126p, 128p and 130p, with shareholders responding with the number of shares they're willing to have bought back off them at 120p, the additional number they're willing to have bought back off them at 122p, and so on up to the additional number they're willing to have bought back off them at 130p. The company then finds the price at which the total number of shares tendered at that price or below, multiplied by that price, is above the amount that they're willing to spend on the buyback but the same is not true of the next price down, and buys back all the shares tendered below that price, none of those tendered above that price, and scaled-back numbers of shares tendered at that price. The price paid for all the shares bought back is that price, not the price at which they were tendered - e.g. if the company can spend all the money it wishes to spend on the buyback on shares tendered at 124p or below, but not on only shares tendered at 122p or below, then it pays 124p for every share it buys back, regardless of whether they were tendered at 120p, 122p or 124p. But all of those tendered at 120p or 122p will be bought back, and only a scaled-back fraction of those tendered at 124p.

There may well be other forms - those are just the two forms I remember having encountered. I haven't encountered many tender offers, though - I'm pretty certain my grand total of them since the turn of the century is in single figures, and most of those have been in my smallcaps portfolio, not my HYP. Or quite possibly all of them - offhand, I cannot actually think of a tender offer I've encountered from a HYP company. (As an example of the simple form from a non-HYP company see https://investegate.co.uk/zytronic-plc- ... 00094601N/ and https://investegate.co.uk/zytronic-plc- ... 55383776Q/ - but note that's not an invitation to discuss that company or its tender offer here, just an example to look at to see what a fairly simple tender offer looks like.)

From an individual HYPer's point of view, tender offers are IMHO the best way I know of for companies to return surplus cash to shareholders, as they get to choose how much of their share of the cash they want returned and how much left invested in the company, without excessive transaction costs if they only want a small amount (whereas market buybacks offer the choice but will cost one a selling commission if one wants to take part, and dividends are free of excessive transaction costs but offer no choice about whether you receive them). From the company's point of view, however, tender offers must have quite large transaction costs, due to the need to get responses from all shareholders and to comply with regulations about companies dealing with small investors. (It's occurred to me while writing this post that the latter may well be the reason why I've rarely if ever seen a HYP company do a tender offer for their ordinary shares - the regulatory costs might grow very large indeed if one has to comply with many countries' regulations.)

Gengulphus

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Re: HSBC 3Q Earnings Release, posted on Company News.

#453360

Postby GoSeigen » October 26th, 2021, 8:56 pm

monabri wrote: However, looking at the number of shares I hold in HSBC and the effective loss of a 10 cent dividend, I'm sort of swinging to Pyad's view in terms of how much nicer the 10 cent per share divi would have been in my pocket.



[expletive acronym deleted] if you want 10% in your pocket why don't you just sell 10% of your shares then? It makes not the slightest difference where the 10% comes from.

GS


Moderator Message:
Following a report, I have cleaned up this post as best as I can, deleting some dubious wording, and removing a semi-pejorative personal reference that may also have been incorrect. What remains is an answer that does not address the quoted comments, and never did: 10% was never mentioned by monabri, who instead referred to a potential (additional) 10¢ dividend payment. --MDW1954

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Re: HSBC 3Q Earnings Release, posted on Company News.

#453363

Postby GoSeigen » October 26th, 2021, 9:00 pm

Gengulphus wrote:(It's occurred to me while writing this post that the latter may well be the reason why I've rarely if ever seen a HYP company do a tender offer for their ordinary shares - the regulatory costs might grow very large indeed if one has to comply with many countries' regulations.)


Precisely, and might easily exceed the 1% or whatever trading costs to sell 10% of your own holding if you wish to.

GS

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Re: HSBC 3Q Earnings Release, posted on Company News.

#453380

Postby Dod101 » October 26th, 2021, 9:38 pm

The fact is that a tender offer is a complicated business. Much easier for the company just to instruct its brokers to buy in shares in the open market up to a given price limit and to spend a given amount of money. Apart from the mechanics, what people do not seem to understand is that that reduces the number of shares outstanding and so reduces the commitment from the company when it declares a dividend thereafter. Distributing surplus cash as a dividend is not at all the same thing as distributing it by buying in shares and thus reducing the issued capital of the company. HSBC has sold its French business and its retail business in the US and thus has reduced the size of the company so reducing the capital seems perfectly logical.

Dod

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Re: HSBC 3Q Earnings Release, posted on Company News.

#453385

Postby csearle » October 26th, 2021, 9:44 pm

Gengulphus wrote:...
Thank you ever so much for that explanation. All new to me! C.


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