I feel like over the past few weeks I have been writing a fair amount about new management at the top of some FTSE 100 companies. More accurately I suppose, writing about the ousting of current management as unhappy shareholders make their feelings felt.
The phrase “resigned by mutual agreement with the board” is one I have been saying again and again, and it strikes me as the same type of mutual agreement one might have when your wife tells you she wants a divorce. Today then, once again, I heard those words as HSBC (LSE: HSBA) announced CEO John Flint would be leaving the company after just 18 months in the role.
Good news, bad news
HSBC seemingly waited for its latest interim results to make the announcement – the positive numbers perhaps offsetting some of the losses the shares would perhaps make with news of Mr Flint’s departure. As I write, the price is down almost 2% on the day.
Results for the first half were strong overall, showing after-tax profit increasing by 18.1% compared to the same time last year, while adjusted revenues climbed 8% and operating expenses were down 2.3%. Earnings per share came in at $0.42, while revenue in the Asia region – where HSBC generates about 80% of its profits – increased 7% compared to H1 2018.
As if to soften the blow of Mr Flint’s resignation further, the company also announced a $1bn share buyback, which it said should begin soon. HSBC has been seeing a tough operating environment for the past year or so, with trade tensions between the US and China, low interest rates and Brexit uncertainty all taking their toll.
Despite today’s strong numbers, the bank still warned of “an increasingly complex and challenging global environment” – a challenge that for now, previous Head of Commercial Banking Noel Quinn will have to face as he takes the reigns while the board searches for a permanent replacement.
Time to buy?
As an investment prospect, there are definitely some positives to consider. The latest numbers suggest a P/E for the shares of about 11 – generally in line with the market as a whole, though not necessarily cheap for the banking sector. At its current price, HSBC is offering a dividend yield of 6%, which I think it is fair to say is brought about more by a (perhaps unfairly) weak share price rather than the dividend itself being too high.
It may not be all smooth sailing of course – any Brexit deal and the terms of the UK separation are far from being finalised, with the banking sector potentially one of the most exposed to Brexit in real terms. Meanwhile the US-China trade tensions seem to be once again rising to the surface – the Renminbi today falling past Rmb7 per dollar for the first time since the financial crisis.
Having said all that, I agree with my fellow Fool Andy Ross that strong numbers in Asia, which we have seen today, bode well for the bank. The financial results and the announced share buyback are good news for investors, as perhaps is fresh management coming in. I think now may certainly be a time to consider buying HSBC.
