Tuesday, August 1, 2017

HSBC increased profits and buybacks

This trend in increased buybacks could continue for a while as it looks like the UK regulators have modified their regulatory arrangements over the past year to remove some substantial amounts of non-risk assets from the composition of their Leverage Ratio; leaving the institutions largely over-capitalized.

BOE regulatory statement here.

The institutions seem to be using the newly excess regulatory balances to buy back shares to get back to a preferred ROE.

There is current potential for this same series of events to occur in the US system either by a US regulatory mod like we saw here in UK (Mnuchin's Treasury is currently looking at it) or just by the Fed substantially reducing the amount of non-risk reserve balances currently held by the institutions at the Fed under the current QE monetary policy.

It might work out to be a few $100B issue to the US institutions.

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