What's going on?

London-based banking giant HSBC announced on Monday that it was prepared to use its growing stash of cash to buy back up to $2 billion worth of its own shares � and its stock jumped by more than 2%.

What does this mean?

Europe�s biggest bank reported a 57% rise in profits in the second quarter of 2017 versus a year ago. Even though some of the bank�s higher profits can be linked to the weaker value of the pound (e.g. overseas earnings become worth more in pound terms), its profits still soundly beat expectations, even when adjusted for the dip in the pound.

Now, with more cash on hand, HSBC announced it would buy more of its own stock in a so-called �share repurchase� program. Doing so is a way of returning cash to shareholders, with those who don�t sell their shares ending up owning proportionally more of the bank.

Why should I care?

For markets: Higher interest rates would be positive for HSBC and other banks.

If the bank continues to perform well, it should have more cash to return to shareholders in the near future � especially if interest rates increase. That�s because HSBC would be able to charge its customers more (banks, like HSBC, that make lots of loans are the biggest beneficiaries of higher interest rates) � and therefore make a higher profit.

The bigger picture: As banks get healthier, they can return more money to their shareholders.

During the 2008 financial crisis and for years afterwards, banks were focused on increasing the amount of cash they held, partly to help avoid a repeat of the banking crisis (more cash creates a greater safety cushion for times when banks� losses rise, for example from fewer loans being repaid). But now many banks, including HSBC and most major US banks, are much healthier and are boosting their cash returns to shareholders � which is helping push up their stock prices.