HSBC's Buyback Boosts Hope Amid Profit Slump: Is This a Bullish Buy Signal?

Investors, listen up! HSBC just reported a profit decline that sent headlines into a frenzy—but here’s the thing: this isn’t the end of the story. The bank’s $3 billion buyback plan and hidden strengths in its adjusted results could be the catalyst for a comeback. Let’s dig into the numbers and see if this is a screaming buy or a warning sign.

The Profit Drop Isn’t All Bad
HSBC’s pretax profit tumbled 25% to $9.48 billion in Q1 2025. But here’s the catch: last year’s results included a $3.7 billion windfall from selling its Canadian and Argentine businesses—a one-time boost that’s gone now. Strip out that noise, and the adjusted pretax profit jumped by $1 billion to $9.8 billion, blowing past analyst estimates. Earnings per share (EPS) fell, but only because of that inflated prior-year baseline.

Revenue dipped 15% to $17.65 billion, but again, that’s misleading. Exclude one-off items, and revenue rose 7% to $17.7 billion. Lower funding costs and smarter investments in wealth management, trading, and debt/equity products are driving this. The bank’s return on equity (ROTE) hit 18.4%—a solid improvement from 16.4% a year ago—and it’s on track to hit its mid-teens target through 2027.

The Buyback: A Vote of Confidence—or Desperation?
HSBC is now repurchasing $3 billion of its own shares, starting after its May 2 AGM. That’s a big move, but it comes with a caveat: the dividend was slashed by 68% to $0.10 per share. The bank claims it’s “being prudent” amid global economic uncertainty, but let’s parse this.

A buyback can be a sign of confidence if the stock is undervalued. HSBC’s shares are trading at around 835 pence in London and $56 in the U.S., near multi-year lows. But the dividend cut? That’s a red flag. Still, with assets growing to $3.054 trillion and cash reserves still at $255 billion, the bank isn’t exactly on its knees.

The CEO’s Case for Optimism
CEO Georges Elhedery emphasized “momentum in earnings” and “strategic execution discipline.” He’s not wrong. Wealth management fees, trading income, and net interest income—all key drivers—are ticking upward. The bank reaffirmed its 2025 net interest income forecast of $42 billion and expects mid-single-digit lending growth over the medium term.

But there’s a catch: near-term lending demand is “muted” due to global economic headwinds, including U.S. protectionism. That’s why the dividend got axed. Yet analysts like Jefferies’ Joseph Dickerson see the buyback as a sign of strength, calling it a “resilience signal” despite geopolitical risks.

So, Is This a Buy?
Here’s the deal: HSBC’s underlying performance is improving, and the buyback is a clear bid to support its stock. The ROTE at 18.4% is strong, and its fee-based businesses (wealth, trading) are booming. But the dividend cut and weak near-term lending outlook are valid concerns.

The stock’s slight pop on the day of the report (up 0.2% in London, 0.6% in the U.S.) suggests investors are buying the dip. If you’re a long-term investor, this could be a rare opportunity. HSBC’s $3 billion buyback alone could boost earnings per share by ~2-3%, and its targets for mid-teens ROTE through 2027 are achievable if it keeps trimming costs and boosting its wealth franchise.

Final Verdict: Buy with Caution
HSBC is a classic “value trap” candidate—cheap for a reason—but the underlying data shows a company turning the corner. The buyback is a big plus, and the dividend cut was necessary to preserve capital. If you can stomach short-term volatility, this is a stock to watch. The adjusted profit beat, improving ROTE, and $42 billion net interest income target all point to a recovery.

But don’t get greedy. The geopolitical risks and U.S. policy uncertainty are real. Wait for a pullback below $55 to dip your toes in. If HSBC can sustain its adjusted profit growth, this could be a steal.

Final Tip: Keep an eye on lending demand in Q3. If it picks up, HSBC’s shares could soar. For now, this is a “hold” with potential upside—if you’ve got patience.

Bottom Line: HSBC’s Q1 report isn’t a disaster. The buyback and improving fundamentals make it a compelling play—if you’re willing to weather the uncertainty.