HSBC and BP, two prominent London-listed blue chips, have experienced significant success recently, with HSBC shares reaching their highest point in four years and BP’s stock achieving its best level since May. This remarkable performance is primarily due to their respective billion-dollar purchase programs.
HSBC’s Impressive Growth and Investment
HSBC revealed outstanding second-quarter pre-tax profits of $8.8 billion, representing an impressive 89% increase. This remarkable growth can be attributed to rising interest rates in both the U.K. and the U.S. As a result, HSBC is planning its second $2 billion buyback of the year.
The bank, often competing with BNP Paribas for the status of Europe’s largest bank in terms of assets, aims to reward its investors who rejected a proposal in May by its largest shareholder, Chinese insurer Ping An, to split the bank into East and Western segments. This decision showcases HSBC’s commitment to its existing structure while simultaneously bolstering investor confidence.
Richard Hunter, head of markets at Interactive Investor, praised HSBC’s achievements, stating, “HSBC has conclusively demonstrated both growth and financial strength through its sheer size, bringing an end to a somewhat disappointing bank reporting season. The company’s announcement of a further share buyback and the upgrades to its guidance allows little room for skepticism.”
Hunter also acknowledged that while the Chinese economy is currently faltering, HSBC’s prospects are diverse and plentiful. This is one of the key reasons behind the recent surge in the share price.
Market Reaction
As a clear reflection of this positive news, HSBC shares climbed over 1% on Tuesday, surpassing the 650 pence mark in London. This marks the highest value since July 2019. Moreover, HSBC shares have achieved a remarkable 27% gain so far in 2023, while the FTSE 100 has only risen by 3.8% during the same period.
BP, also part of the London blue chips, managed to shrug off the impact of lower oil prices on this exceptional day for the market. With confidence in the company’s future, its stock achieved its highest level since May.
Overall, HSBC and BP have showcased their resilience and potential by seizing opportunities for growth and maintaining a strong financial position. This success stands as a testament to their ongoing market dominance and capacity to deliver positive outcomes for their investors.
BP Raises Dividend Despite Earnings Slide
BP stock made gains today, with their shares rising by 1.6%. This comes in the wake of the energy major’s announcement that lower oil prices have resulted in a significant drop in second-quarter earnings – down by over two-thirds to $2.6 billion. Despite these disappointing figures, BP has managed to increase its dividend by 10% and has pledged an additional $1.5 billion for share repurchases this quarter. It’s worth noting that the company has already completed $4.5 billion worth of share repurchases earlier this year.
The news of BP’s lower profits has left investors disappointed this earnings season, as explained by Derren Nathan, head of equity analysis at Hargreaves Lansdown. However, he also highlights that BP has taken a strategic approach by prioritizing shareholder returns and has the potential to continue raising dividends throughout the year, even if oil prices continue to decline. The fact that this decision hasn’t affected capital investment guidance is seen as a positive move.
Looking at the wider market, European bourses have experienced downward pressure due to weak economic data from China. The Stoxx 600 index fell by 0.6%, while the euro lost 0.2% against the dollar ($1.0975). Additionally, the pound has dipped by 0.4% against the dollar ($1.2782) following a report on the sharp decline in UK house prices – the steepest drop in 14 years.
