HSBC: HSBC Holdings plc 2025 Interim Results

HSBC Holdings plc 2025 Interim results Georges Elhedery, Group CEO, said: "We're making positive progress in becoming a simple, more agile, focused organisation built on our core strengths. In the first half, we continued to execute our strategy with discipline and each of our four businesses sustained momentum in their earnings with each growing revenue. This gives us confidence in our ability to deliver our targets. We continue to navigate this period of economic uncertainty and market volatility from a position of strength, putting the changing needs of our customers at the heart of everything we do." Financial performance in 1H25 - Profit before tax decreased by $5.7bn to $15.8bn compared with 1H24, primarily due to the recognition of dilution and impairment losses of $2.1bn related to our associate Bank of Communications Co., Limited ('BoCom'). In addition, there was an adverse impact from the non-recurrence of $3.6bn in net gains in 1H24 relating to the disposals of our banking business in Canada and our business in Argentina. Profit after tax of $12.4bn was $5.2bn or 30% lower compared with 1H24. - Constant currency profit before tax excluding notable items increased by $0.9bn to $18.9bn compared with 1H24, from a strong performance in Wealth in our International Wealth and Premier Banking ('IWPB') and Hong Kong business segments, supported by higher customer activity, and in Foreign Exchange and Debt and Equity Markets driven by volatile market conditions. This was partly offset by higher expected credit losses and other credit impairment charges ('ECL') and a targeted increase in operating expenses, which included higher spend and investment in technology. - Annualised return on average tangible equity ('RoTE') in 1H25 was 14.7%, compared with 21.4% in 1H24. Excluding notable items, annualised RoTE in 1H25 was 18.2%, a rise of 1.2 percentage points compared with 1H24. - Revenue decreased by $3.2bn or 9% to $34.1bn compared with 1H24. The reduction reflected the year-on-year impact of notable items, mainly from disposals in Canada and Argentina in 1H24. Excluding notable items, revenue increased primarily due to fee and other income growth in Wealth and in Foreign Exchange and in Debt and Equity Markets. Constant currency revenue excluding notable items rose by $1.9bn to $35.4bn compared with 1H24. - Net interest income ('NII') decreased by $0.1bn compared with 1H24, including an adverse impact of $0.4bn from foreign currency translation differences. On a constant currency basis, NII increased as the benefit of our structural hedge and lower costs of funding offset reductions due to the business disposals in Argentina and Canada and the impact of lower market interest rates on asset re-pricing. The reduction in interest rates reduced the funding costs of the trading book, which led to a fall in banking net interest income ('banking NII') of $0.9bn or 4% compared with 1H24. - Net interest margin ('NIM') of 1.57% decreased by 5 basis points ('bps') compared with 1H24, mainly due to an adverse impact from foreign currency translation differences and the disposal of our business in Argentina, partly offset by the benefit of our structural hedge. - ECL of $1.9bn were $0.9bn higher than in 1H24. The charge in 1H25 included charges related to the Hong Kong commercial real estate ('CRE') sector. This reflected updates to our models used for ECL calculations, an increase in allowances for new defaulted exposures, as well as the over-supply of non-residential properties putting continued downward pressure on rental and capital values. The 1H25 period also included allowances to reflect heightened uncertainty and a deterioration in the forward economic outlook due to geopolitical tensions and higher trade tariffs. In 1H24, the ECL charge benefited from allowance releases, mainly in the UK. - Operating expenses of $17.0bn were $0.7bn or 4% higher than in 1H24. Growth reflected restructuring and other related costs associated with our organisational simplification of $0.6bn. It also included higher spend and investment in technology. These increases were partly offset by cost reductions due to our disposals in Canada and Argentina. - Target basis operating expenses were $0.4bn or 3% higher than in 1H24, primarily due to higher spend and investment in technology and the impacts of inflation. - Customer lending balances of $982bn increased by $51bn compared with 31December 2024, including favourable foreign currency translation differences. On a constant currency basis, lending balances increased by $7bn, mainly in our UK business. - Customer accounts of $1,719bn increased by $64bn compared with 31December 2024, including favourable foreign currency translation differences. On a constant currency basis, customer accounts decreased by $8bn, mainly from the classification of deposits to held for sale, notably $12bn related to our custody business in Germany, and outflows in CIB in the UK, partly offset by an increase in our Hong Kong business. - Common equity tier 1 ('CET1') capital ratio of 14.6% decreased by 0.3 percentage points compared with 31December 2024, driven by an increase in risk-weighted assets ('RWAs'), partly offset by an increase in CET1 capital through profit generation net of distributions. The increase in RWAs was mainly driven by foreign currency translation differences and asset size movements. - The Board has approved a second interim dividend of $0.10 per share. We also intend to initiate a share buy-back of up to $3bn, which we expect to complete by our third quarter 2025 results announcement. Financial performance in 2Q25 - Profit before tax decreased by $2.6bn or 29% to $6.3bn compared with 2Q24, primarily due to the recognition of dilution and impairment losses of $2.1bn in BoCom. Profit after tax of $4.9bn was $2.0bn or 29% lower compared with 2Q24. On a constant currency basis, profit before tax decreased by $2.7bn or 30%. - Revenue fell by $0.1bn to $16.5bn compared with 2Q24. The reduction included the impact of notable items, as mentioned above. Excluding these, revenue increased primarily due to fee and other income growth in Wealth in our IWPB and Hong Kong business segments, supported by higher customer activity, and in Foreign Exchange and in Debt and Equity Markets, driven by volatile market conditions. Constant currency revenue excluding notable items rose by $0.8bn to $17.7bn. - NIM of 1.56% decreased by 3 bps compared with 1Q25, driven by lower margins in Asia. - ECL of $1.1bn were $0.7bn higher than in 2Q24. The charge in 2Q25 included charges related to the Hong Kong CRE sector. This reflected updates to our models used for ECL calculations, an increase in allowances for new defaulted exposures, as well as the over-supply of non-residential properties putting continued downward pressure on rental and capital values. In 2Q24, the ECL charge benefited from a release of allowances in the UK and from a recovery relating to a single Corporate and Institutional Banking ('CIB') client. - Operating expenses of $8.9bn rose by $0.8bn or 10% compared with 2Q24. The increase was related to restructuring and other related costs associated with our organisational simplification, and from higher spend and investment in technology. These increases were partly offset by the impact of the disposal of our business in Argentina. - Customer lending increased by $37bn compared with 1Q25 on a reported basis and by $5bn on a constant currency basis. - Customer accounts increased by $52bn compared with 1Q25 on a reported basis and by $2bn on a constant currency basis. Outlook - We operate in a global environment characterised by constant change and uncertainty, creating volatility in both economic forecasts and financial markets. The Group is well positioned to manage the impacts of these challenges and is focused on delivering the best outcomes for our customers. - We continue to target a mid-teens RoTE in each of the three years from 2025 to 2027 excluding notable items. We also continue to expect banking NII of around $42bn in 2025 based on our latest modelling, recognising the favourable impacts of foreign exchange rates and the adverse effect of the fall in the Hong Kong Interbank Offered Rate ('HIBOR'), particularly during 2Q25. - The Group is well positioned to manage the changes and uncertainties prevalent within the global environment in which we operate, including in relation to tariffs. We have modelled a disruptive tariff scenario that includes significant reductions in policy rates, together with broader macroeconomic deterioration. While we would expect the direct impact from tariffs to have a relatively modest impact on our revenue, the broader macroeconomic deterioration may see RoTE excluding notable items fall outside of our mid-teens targeted range in future years. - We now expect ECL charges as a percentage of average gross loans to be around 40bps in 2025 (including loans held for sale balances). This reflects continuing challenging market conditions in the Hong Kong CRE sector. - The Group remains on track to deliver on our cost target. Our growth in target basis operating expenses in 2025 compared with 2024 remains approximately 3%. Our cost target includes the impact of simplification-related saves associated with our announced reorganisation. - We continue to expect demand for lending to remain muted during 2025. However, over the medium to long term we expect mid-single digit percentage growth for year-on-year customer lending balances. - We continue to expect double-digit percentage average annual growth in fee and other income in Wealth over the medium term. - We intend to manage the CET1 capital ratio within our medium-term target range of 14% to 14.5%, with a dividend payout ratio target basis of 50% for 2025, excluding material notable items and related impacts. u Our targets and expectations reflect our current outlook for the global macroeconomic environment and market-dependent factors, such as market-implied interest rates (as of mid-July 2025) and rates of foreign exchange, as well as customer behaviour and activity levels. u We do not reconcile our forward guidance on RoTE excluding the impact of notable items, target basis operating expenses, dividend payout ratio target basis or banking NII to their equivalent reported measures. u For further details, please refer to the following pages of our Interim Report 2025: pages 18 to 19 for a further explanation of RoTE excluding notable items, banking NII, target basis operating expenses and dividend payout ratio target basis. For further information on our CET1 ratio, see page 67. Key financial metrics Half-year to 30 Jun 2025 30 Jun 2024 Reported results Profit before tax ($m) 15,810 21,556 Profit after tax ($m) 12,441 17,665 Net operating income before change in expected credit losses and other credit impairment charges ('revenue') ($m) 34,122 37,292 Cost efficiency ratio (%) 49.9 43.7 Net interest margin (%) 1.57 1.62 Basic earnings per share ($) 0.65 0.89 Diluted earnings per share ($) 0.65 0.88 Dividend per ordinary share (in respect of the period) ($)1 0.20 0.41 Alternative performance measures Constant currency profit before tax ($m) 15,810 21,491 Constant currency revenue ($m) 34,122 37,057 Constant currency cost efficiency ratio (%) 49.9 43.7 Constant currency profit before tax excluding notable items ($m) 18,928 18,006 Constant currency revenue excluding notable items ($m) 35,397 33,493 Constant currency profit before tax excluding notable items and strategic transactions ($m) 18,928 17,676 Constant currency revenue excluding notable items and strategic transactions ($m) 35,397 32,672 Expected credit losses and other credit impairment charges (annualised) as % of average gross loans and advances to customers (%) 0.40 0.20 Expected credit losses and other credit impairment charges (annualised) as % of average gross loans and advances to customers, including held for sale (%) 0.40 0.20 Basic earnings per share excluding material notable items and related impacts ($) 0.78 0.68 Return on average ordinary shareholders' equity (annualised) (%) 13.7 19.8 Return on average tangible equity (annualised) (%) 14.7 21.4 Return on average tangible equity excluding notable items (annualised) (%) 18.2 17.0 Target basis operating expenses ($m) 16,179 15,764 At 30 Jun 2025 31 Dec 2024 Balance sheet Total assets ($m) 3,214,371 3,017,048 Net loans and advances to customers ($m) 981,722 930,658 Customer accounts ($m) 1,718,604 1,654,955 Average interest-earning assets, year to date ($m) 2,159,900 2,099,285 Loans and advances to customers as % of customer accounts (%) 57.1 56.2 Total shareholders' equity ($m) 192,554 184,973 Tangible ordinary shareholders' equity ($m) 159,557 154,295 Net asset value per ordinary share at period end ($) 9.88 9.26 Tangible net asset value per ordinary share at period end ($) 9.17 8.61 Capital, leverage and liquidity Common equity tier 1 capital ratio (%)2,3 14.6 14.9 Risk-weighted assets ($m)2,3 886,860 838,254 Total capital ratio (%)2,3 20.1 20.6 Leverage ratio (%)2,3 5.4 5.6 High-quality liquid assets (liquidity value, average) ($m)3,4 678,059 649,210 Liquidity coverage ratio (average) (%)3,4 140 138 Share count Period end basic number of $0.50 ordinary shares outstanding, after deducting own shares held (millions) 17,397 17,918 Period end basic number of $0.50 ordinary shares outstanding and dilutive potential ordinary shares, after deducting own shares held (millions) 17,529 18,062 Average basic number of $0.50 ordinary shares outstanding, after deducting own shares held (millions) 17,646 18,357 u For reconciliations of our reported results to a constant currency basis, including lists of notable items, see page 26 of the Interim Report 2025. For detail on other alternative performance measures, including definitions and calculations, see 'Reconciliation of alternative performance measures' on pages 38 to 41 of the Interim Report 2025. 1 Dividend per ordinary share for the half-year to 30 June 2024 includes the special dividend of $0.21 per ordinary share arising from the proceeds of the sale of our banking business in Canada to Royal Bank of Canada. 2 References to EU regulations and directives (including technical standards) should, as applicable, be read as references to the UK's version of such regulation or directive, as onshored into UK law under the European Union (Withdrawal) Act 2018, and as may be subsequently amended under UK law. Regulatory capital ratios and requirements are based on the transitional arrangements of the Capital Requirements Regulation in force at the time. Effective 1 January 2025, the IFRS9 transitional arrangements came to an end, followed by the end of the CRR II grandfathering provisions on 28 June 2025. 3 Regulatory numbers and ratios are as presented at the date of reporting. Small changes may exist between these numbers and ratios and those subsequently submitted in regulatory filings. Where differences are significant, we may restate in subsequent periods. 4 The liquidity coverage ratio is based on the average value of the preceding 12 months. Highlights Half-year to 30 Jun 2025 30 Jun 2024 $m $m Reported Revenue1,2,3 34,122 37,292 Change in expected credit losses and other credit impairment charges (1,941) (1,066) Operating expenses (17,022) (16,296) Share of profit in associates and joint ventures less impairment3 651 1,626 Profit before tax 15,810 21,556 Tax charge (3,369) (3,891) Profit after tax 12,441 17,665 Constant currency4 Revenue1,2,3 34,122 37,057 Change in expected credit losses and other credit impairment charges (1,941) (993) Operating expenses (17,022) (16,192) Share of profit in associates and joint ventures less impairment3 651 1,619 Profit before tax 15,810 21,491 Tax charge (3,369) (3,870) Profit after tax 12,441 17,621 Notable items Revenue Disposals, wind-downs, acquisitions and related costs2 (139) 3,571 Dilution loss of interest in BoCom associate3 (1,136) - Operating expenses Disposals, wind-downs, acquisitions and related costs (227) (101) Restructuring and other related costs5 (616) 19 Impairment losses of interest in BoCom associate3 (1,000) - Tax Tax credit on notable items 379 14 1 Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue. 2 The amount in 1H25 includes a $0.1bn mark-to-market gain on interest rate hedging of the portfolio of retained loans post sale of our retail banking operations in France and a $0.1bn fair value loss on Grupo Financiero Galicia's ('Galicia') American Depositary Receipts ('ADRs') received as purchase consideration from the sale of our business in Argentina, which were disposed of in 2Q25. Amount in 1H24 includes a $4.8bn gain on disposal of our banking business in Canada, inclusive of a $0.3bn gain on the foreign exchange hedging of the sale proceeds, the recycling of $0.6bn in foreign currency translation reserve losses and $0.4bn of other reserves recycling losses. This was partly offset by a $1.2bn impairment recognised in relation to the sale of our business in Argentina. 3 Amounts in 'Revenue' and 'Dilution loss of interest in BoCom associate' include a loss of $1.1bn inclusive of reserves recycling as a result of the dilution of our shareholding in BoCom. We have also recognised a $1.0bn impairment loss following an impairment test on the carrying value of the Group's investment in BoCom in 'Share of profit in associates and joint ventures less impairment' and 'Impairment losses of interest in BoCom associate'. See Note 10 on page 95 of the Interim Report 2025. 4 Constant currency performance is computed by adjusting reported results of comparative periods for the effects of foreign currency translation differences, which distort period-on-period comparisons. 5 Amounts relate to restructuring provisions recognised in 2025 as well as reversals of restructuring provisions recognised during 2022. Group CEO's shareholder letter Dear fellow shareholders, In my first letter to you I set out a clear vision to unlock HSBC's full potential. It is built on the principle of becoming a simple, more agile, focused organisation to better serve our customers. This mission has become even more important as the world in which we operate becomes even more uncertain. By being mission-focused we intend to build on our strong foundations and hallmark financial strength, growing in areas of core competitive advantage while remaining true to our values. This will help us to achieve our refreshed ambition of becoming the most trusted bank globally, putting customers at the heart of everything we do. We are making positive progress. Strong performance We performed strongly in the first half, delivering an annualised return on tangible equity ('RoTE') of 14.7%, or 18.2% excluding the impact of notable items. Our four businesses performed strongly with revenue growing in each. We are investing in customer experience, accelerating growth in strategic activities and harnessing the power of technology to change the way we work to increase productivity. In our Hong Kong home market, we attracted a further 600,000 new to bank customers in the first six months. We also grew deposits by 9% over the last twelve months on a constant currency basis. In our UK home market, our loan book grew by 4% on the same basis. We were particularly encouraged by signs of recovery in lending growth in commercial banking. IWPB performed strongly. Our Group-wide wealth businesses grew revenue by 22%, on a constant currency basis, in line with our medium-term guidance of growing fee and other income at double-digit rates. In total, we attracted net new invested assets of $44bn with $27bn booked in Asia. In CIB, we grew fee and other income by 18% on a constant currency basis. More than two-fifths of this growth came from our wholesale transaction banking business. These strong results enable us to announce a second interim dividend of $0.10 per share and a further share buy-back of up to $3bn. In total, we have announced $9.5bn in returns to our shareholders through dividends and share buy-backs in the first half of 2025. We have also reduced our share count by 13% from the first quarter of 2023. Economic uncertainties The global economy is facing structural challenges that are both longstanding and newly unfolding. This is leading to economic uncertainty and market volatility. 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HSBC: HSBC Holdings plc 2025 Interim Results

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