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HSBC and Standard Chartered shares jump despite profit slides

Shares in HSBC jumped 3.6% on Wednesday despite it revealing a 29% slide in profits to $9.7bn for the first half.

The bank also announced a $2.5bn share buy-back will take place during the second half of the year, which cheered investors.

Group chief executive Stuart Gulliver explained that the sale of the bank’s Brazil unit will fund the move.

“Following the successful sale of our Brazil business and having received the appropriate regulatory clearances, I am pleased to announce that we will execute a share buy-back of up to $2.5bn, which should benefit all shareholders and demonstrates the strength and flexibility of our balance sheet,” he said.

Gulliver said the bank had ‘performed reasonably well’ in the first half. “While economic conditions remain difficult, we are making progress in all of the areas within our control. In the meantime, our balanced business model, strong liquidity and strict cost management make us highly resilient,” he added.

“The bank is currently rewarding shareholders with dividends and a new share buy-back scheme,” noted senior analyst at Hargreaves Lansdown Laith Khalaf. “The stock is now yielding around 7.5%, which suggests markets are treating dividend payments with a healthy dose of scepticism, though the $2.5bn share buy-back programme may relieve some of that doubt. HSBC is facing challenging times as it restructures its business, but for the moment, at least investors are being paid to wait.”

Fund management firms with large holdings in HSBC include Aberdeen Asset Management, Standard Life Investments and sister company HSBC Global Asset Management.

Fellow FTSE 100 bank Standard Chartered had a stellar morning in terms of its share price, with a gain of more than 9%.

Again this was despite reporting a fall in profits. The emerging markets focused bank said pre-tax profit was 46% down on the same period last year at $994m.

However it also announced a big reduction in bad debt on its books, with impairment losses reduced to $1.1bn from $1.7bn.

Standard Chartered’s biggest shareholders include Aberdeen Asset Management, Templeton Global Advisors and Schroders.

Part of the Mark Allen Group.