HSBC, one of Britain’s largest lenders, reported a year-on-year drop of almost 29 percent in first-half pre-tax profit, missing analysts’ expectations.

For the first six months of the year, HSBC logged a pre-tax profit of $9.71 billion, down 28.7 percent from $13.62 billion in the same period a year earlier and the $10 billion figure estimated by analysts in a Reuters poll.

Revenue in the first half was down 4 percent at $27.86 billion.

The bank reported $3.61 million in pre-tax profit for the second quarter, a sharp decline from the previous quarter’s $6.11 billion figure.

However, the bank also announced it would be conducting a share buy-back of up to $2.5 billion in the second half of 2016, adding that it would sustain its annual dividend at the current level for “the foreseeable future.”

Panama Papers

In its interim report, HSBC said it had received requests from “various regulatory and law enforcement authorities around the world” for information on Mossack Fonseca & Co, the Panama law firm whose data was leaked earlier this year.

HSBC was a major client of Mossack Fonseca, according to media reports, and has denied wrongdoing. It is alleged that banks and other entities used the law firm to help clients evade taxes.

The investigation into Mossack Fonseca was one of multiple legal proceedings the bank detailed in its results. Others included litigation relating to the Bernie Madoff Ponzi scheme, an investigation into loans sold by the bank to purchase mortgage securitizations before the global financial crisis and investigations into the alleged manipulation of Libor (London Interbank Offered Rate) and alleged non-compliance with anti-money laundering laws.

“Litigation remains a key risk for the banking sector, and HSBC’s report on the legal proceedings facing the bank reads like a barely trimmed-down version of ‘War and Peace.’ This includes a section on the Panama Papers, which states HSBC does not know at present what, if anything, the impact on the bank will be, but warns it could be significant,” Laith Khalaf, senior analyst at FTSE 100-listed financial services firm Hargreaves Lansdown, said in a note on Wednesday.

After the results were out, Hong Kong-listed shares of HSBC were down 1.7 percent, unchanged from levels before the release, but HSBC’s London-listed shares were up nearly 4 percent in early Wednesday trading on news of the buyback.

Chief executive Stuart Gulliver wrote in a statement that the bank had performed “reasonably well in the first half in the face of considerable uncertainty,” and that the reduction in profit reflected what had been a strong first half in 2015.

Investors will closely analyze the bank’s outlook following the historic Brexit vote in June, which saw the U.K. vote to exit the European Union (EU).

Brexit

Previously, HSBC said it may relocate staff to Paris should the Brexit vote go ahead, but Ivan Li of Tung Shing Securities didn’t believe that would happen.

“Maybe they will only move the department that deals with euro zone-related trade,” he told CNBC ahead of the earnings report.

In a statement issued the earnings release, HSBC’s chairman Douglas Flint said that the Brexit vote had brought about a “new era for the U.K. and U.K. business.” But he added that HSBC’s 150 years of experience in financing and facilitating trade had showed it the importance of an open trading relationship between the U.K. and the EU.

“Now is a time for calm consideration of all the issues at hand and careful assessment of how prosperity, growth and a dynamic economy for both the UK and the rest of Europe can be ensured following an orderly transition period,” Flint wrote.

On the Brexit issue, Gulliver said it was too soon to know which parts of the business may be impacted by the U.K.-EU divorce.

“There has been a period of volatility and uncertainty which is likely to continue for some time,” he wrote. “We are actively monitoring our portfolio to quickly identify any areas of stress, however it is still too early to tell which parts may be impacted and to what extent.”

Li expects the dividend to be safe this year but warned that it could be cut over the next three to five years.

With two-thirds of its revenue coming from Asia, HSBC is generally shielded from some of the issues that have hurt rivals Lloyds and Barclays, said Martin Smith, East & Partners markets analysis.

SOURCE: CNBC