HSBC Holdings Plc’s shares rose after the Asia-focused lender announced a fresh plan to return money to shareholders after reporting first-quarter results that beat estimates.

The London-headquartered bank will buy back as much as US$2 billion of stock and also resume paying quarterly dividends for the first time since 2019, stepping up capital returns as it faces mounting pressure from one of its largest investors to boost profitability.

Pretax profit tripled to US$12.89 billion, beating an estimate of US$8.64 billion. That was partially driven by a US$2.1 billion reversal of an impairment linked to the delayed sale of its French retail arm and the booking of a US$1.5 billion gain from its purchase of Silicon Valley Bank’s UK business.

“What we see going forward is continued sustainable profits and therefore the potential for a series of buybacks,” Chief Executive Officer Noel Quinn said in an interview on Bloomberg Television. “Based on what we are seeing at the moment, we think we have the potential for a series of capital distributions via dividend and buyback over the coming years.”

The bank’s shares rose 5.7% as of 9:23 a.m. in London.

The quarter was characterized by “strong capital generation,” Jefferies analyst Joseph Dickerson said in a note. “Revenue showed strength notably in non-interest income.”

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HSBC, like its Wall Street and European peers, has seen a recovery in earnings on the back of higher interest rates. As the biggest bank in Hong Kong, the lender is also expected to benefit from increased wealth flows after China dropped its strict pursuit of Covid zero.

The bank is in the midst of a pivot to Asia while shedding unprofitable businesses in North America and Europe. It posted an 82% jump in wealth and personal banking revenue for the quarter, while commercial banking income doubled.

However, the lender said last month that rising interest rates have put a deal to sell its French retail banking business into question, a potential blow to its plans to sharpen its global operations. The delay caused the reversal of a US$2 billion impairment, with Quinn saying on a call with journalists that the unit’s sale can’t be guaranteed.

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HSBC also flagged that it would now seek to complete the sale of its Canadian operations — which had a record quarter — in the first three months of next year.

It took over the UK operations of SVB for £1 (US$1.2) this year, shortly after the failure of the California-based bank. Quinn said on the media call that the bank would drop the SVB brand name in the near future. He added that SVB would remain a standalone unit within the bank and HSBC’s analysis of the UK firm’s loan portfolio hadn’t found any “nasty surprises.”

Costs, Trading Costs were lower than expected, thanks to smaller restructuring charges. The lender’s global banking and markets unit saw revenue rise by a fifth on a constant currency basis, with global payments solutions and foreign exchange operations performing well.

But HSBC warned that it expects continued pressure from “increased migration to term deposits as interest rates rise.” The bank maintained its guidance for net interest income of at least US$34 billion this year.

Other highlights from HSBC’s earnings in the first quarter include:

Credit impairment charge of US$432 million - CET1 ratio of 14.7% - Customer deposits were stable at US$1.6 trillion - Board has approved a first interim dividend of US$0.10 per share - The results come at a pivotal time for HSBC as its directors prepare to face investors at the bank’s annual meeting later this week. On the agenda for the AGM are two investor-proposed resolutions that would force the bank to report regularly on its Asian business, as well as requiring it to lift its dividend to its pre-pandemic level. The bank’s board has recommended that shareholders vote against the resolutions.

In recent months HSBC and top shareholder Ping An Insurance Group Co. have fought an increasingly fraught battle over the bank’s future as the Chinese insurer has repeatedly called for the company to consider a spin off of its Asian unit. HSBC has dismissed the plan as expensive, risky and likely to destroy shareholder value.

HSBC said last month that it had held about 20 high-level meetings with Ping An in the past year to discuss the proposals but that it remained unconvinced by its arguments. Ping An has responded saying that the bank has failed to respect the concerns and views of its investors.

“We have said all along that we believed the fastest and safest way to get increased valuation, increased profit, increased dividends, is by focusing on the current strategy,” Quinn said on Bloomberg Television. “These results show that the strategy is working.”

HSBC shares rise after lender announces US$2 billion share buyback

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