LONDON – HSBC marked a handover of power at the top with a moment of silence, according to a report from Dow Jones Newswires.
The United Kingdom-based lender said nothing about its plans for strategy or share buybacks at its results Tuesday, disappointing investors, who sent the stock down as much as 4.5 percent.
Departing Chief Executive Stuart Gulliver resisted any temptation to give shareholders a parting gift, while his replacement, John Flint, wouldn’t offer the faintest teaser for the new leadership’s strategic program.
Results were slightly weaker than expected, but it was the lack of news on payouts that had analysts worried.
HSBC has funded $5.5 billion worth of stock buybacks in the past 18 months or so on top of roughly $10 billion a year in steady dividends for most of Gulliver’s tenure.
The bank said the lack of a buyback was a technicality: It can’t buy shares while it is selling new junior debt to meet regulatory targets.
However, this pause gives Flint and new Chairman Mark Tucker a chance to make some kind of splash later this year when the pair will set new goals on payouts and launch a new strategy.
So what might that strategy entail?
The core element will be unchanged: That is its focus on winning more retail and business clients in Southern China’s Pearl River Delta, Dow Jones added.
But investors should keep an eye on the United States, where HSBC has excess capital and an opportunity to buy very low-tax earnings growth because it has a vast stock of potential tax discounts.
Like rivals, HSBC took a $1.3 billion charge on deferred tax assets after the US tax cuts, leaving it with $3.2 billion of tax assets to use up on its current business.
But unlike its rivals, it has another $12.3 billion of potential deferred tax assets, which go unrecognized right now because it is very unlikely to earn enough in the US to use them.
Tucker’s experience in Asia and in insurance has most people looking in that direction for clues as to its coming growth or acquisition plans.
However, with about $3 billion in spare capital in the US and this large pool of tax discounts, don’t be surprised if the bank is already fishing in those waters, too.