HSBC Holdings plc Interim Results 2024

Noel Quinn, Group Chief Executive, said:

“After delivering record profits in 2023, we had another strong profit performance in the first half of 2024, which is further evidence that our strategy is working. Our investment in Wealth is delivering higher, more diversified revenue and we continue to grow our core international and scale businesses, all of which helped us to provide $13.7bn of distributions in respect of the first half. We are confident that we have the right strategy and model to grow revenue, even in a lower interest rate environment, and are therefore providing new guidance of a mid-teens return on average tangible equity in 2025.

I have always been immensely proud of the heritage of this bank and the strategic role it plays in the world. My aim when I took this job was to deliver financial performance to match our standing. Working together, I believe we have done that and created a strong platform for growth.”

Financial performance in 1H24

• Profit before tax of $21.6bn was stable compared with 1H23, including a $0.2bn net favourable revenue impact of notable items relating to gains and losses recognised on certain strategic transactions. Profit after tax of $17.7bn was $0.4bn or 2% lower compared with 1H23.
• In 1H24, we completed the disposal of our banking business in Canada, recognising a gain of $4.8bn. We also recognised an impairment of $1.2bn following the classification of our business in Argentina as held for sale. Results in 1H23 included the impact of a $2.1bn reversal of an impairment relating to the sale of our retail banking operations in France and a $1.5bn gain recognised on the acquisition of Silicon Valley Bank UK Limited (‘SVB UK’).
• Constant currency profit before tax excluding notable items was stable at $18.1bn compared with 1H23, as revenue growth and lower expected credit losses and other impairment charges (‘ECL’) were offset by a rise in operating expenses.
• Revenue rose by $0.4bn or 1% to $37.3bn compared with 1H23, including the gains and losses on certain strategic transactions described above. Net interest income (‘NII’) fell by $1.4bn, as growth in HSBC UK and a number of other markets was more than offset by reductions due to business disposals, deposit migration, and redeployment into the trading book in HSBC Bank plc and our main entity in Hong Kong. The increase in funding costs associated with funding the trading book resulted in an increase in banking net interest income (‘banking NII’) of $0.3bn or 1%.
• Revenue growth also reflected the impact of higher customer activity in our Wealth products in Wealth and Personal Banking (‘WPB’), and in Equities and Securities Financing in Global Banking and Markets (‘GBM’). Constant currency revenue excluding notable items rose by 2% to $33.7bn, primarily due to growth in Wealth in WPB, in Equities and Securities Financing in GBM, as well as an increase in Global Payment Solutions (‘GPS’).
• Net interest margin (‘NIM’) of 1.62% decreased by 8 basis points (‘bps’) compared with 1H23, reflecting a rise in the funding cost of average interest-bearing liabilities.
• ECL charges were $1.1bn, a reduction of $0.3bn compared with 1H23. The reduction reflected a release of stage 3 allowances in GBM in HSBC Bank plc, lower ECL in Commercial Banking (‘CMB’) in HSBC UK, and lower charges in the commercial real estate sector in mainland China. In WPB, ECL charges were broadly stable as a release of allowances in the UK was offset by higher charges in Mexico, reflecting unemployment trends and growth in our unsecured portfolio. Annualised ECL were 22bps of average gross loans, including a 4bps reduction due to the inclusion of loans and advances classified as held for sale.
• Operating expenses of $16.3bn were $0.8bn or 5% higher than in 1H23, mainly due to higher technology spend and investment, inflationary pressures and an increase in the performance-related pay accrual. Target basis operating expenses rose by 7% compared with 1H23. This is measured on a constant currency basis, excluding notable items, the impact of retranslating the prior year results of hyperinflationary economies at constant currency, and the direct costs from the sales of our France retail banking operations and our banking business in Canada.
• Customer lending balances of $938bn were stable on a reported basis, and increased by $12bn on a constant currency basis, compared with 31 December 2023. Growth included higher balances in HSBC Bank plc in both CMB and GBM, and higher term lending in CMB in our entities in mainland China and India. In addition, mortgage balances increased in HSBC UK in WPB.
• Customer accounts of $1.6tn fell by $18bn on a reported basis, and increased by $3bn on a constant currency basis compared with 31 December 2023, notably in GBM reflecting growth in time deposit balances in Asia. The increase in GBM included a short-term deposit from a single corporate customer.
• Common equity tier 1 (‘CET1’) capital ratio of 15.0% rose by 0.2 percentage points compared with 4Q23, driven by a reduction in risk-weighted assets (‘RWAs’), partly offset by a reduction in our CET1 capital.
• 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 within three months.

Financial performance in 2Q24

• Reported profit before tax increased by $0.1bn to $8.9bn compared with 2Q23, due to a lower ECL charge, which more than offset higher operating expenses and lower revenue. On a constant currency basis, profit before tax increased by $0.4bn or 4%.
• Revenue fell by $0.2bn to $16.5bn compared with 2Q23, notably as 2Q23 included the operating results of France and Canada for which sales completed in 1Q24. In addition, 2Q24 included a loss related to the recycling of reserves following the completion of the sale of our business in Russia. This was partly offset by growth in Securities Financing and Equities in GBM and from Wealth in WPB.
• ECL of $0.3bn decreased by $0.6bn, reflecting lower charges in 2Q24 in the commercial real estate sector in mainland China, compared with 2Q23, as well as a reduction in charges in HSBC UK, and the release of stage 3 allowances in GBM in HSBC Bank plc.
• Operating expenses of $8.1bn rose by $0.3bn or 3%, due to higher technology costs, including investment, the 2Q23 reversal of historical asset impairments, which did not recur, and inflationary impacts. This was partly offset by reductions following the completion of disposals in Canada and France.
• Customer lending increased by $5bn compared with 1Q24 on a reported basis and by $8bn on a constant currency basis. The growth was mainly from CMB, notably in our entities in mainland China and India, and in WPB from mortgage balance growth in HSBC UK and our entity in the US.
• Customer accounts increased by $24bn compared with 1Q24 on a reported basis and by $27bn on a constant currency basis. The increase was across all businesses, primarily in Asia. The increase included a short-term deposit from a single corporate customer.

Outlook

• We will now target a return on average tangible equity (‘RoTE‘), excluding the impact of notable items, in the mid-teens for both 2024 and 2025.
• Based upon our current forecasts, we expect banking NII of around $43bn in 2024. This guidance remains dependent on the path of interest rates globally.
• While loan growth was 1% in 1H24, revenue has continued to benefit from elevated interest rates. Over the medium to long term, we continue to expect mid-single digit year-on-year percentage growth in customer lending.
• We are reiterating our cost growth guidance of approximately 5% for 2024 compared with 2023, on a target basis, and now expect ECL charges as a percentage of average gross loans in 2024 to be within our medium-term planning range of 30bps to 40bps (including customer lending balances transferred to held for sale).
• Our guidance reflects our current outlook for the global macroeconomic environment, including customer and financial markets activity. This includes our modelling of a number of market dependent factors, such as market-implied interest rates (as of mid-July 2024), as well as customer behaviour and activity levels.
• We intend to manage our CET1 capital ratio within our medium-term target range of 14% to 14.5%, with a dividend payout ratio target basis of 50% for 2024, which excludes material notable items and related impacts.
• Note: we do not reconcile our forward guidance on RoTE excluding notable items, target basis operating expenses, dividend payout ratio target basis or banking NII to their equivalent reported measures.

For further information contact:

Investor Relations

UK – Neil Sankoff
Telephone: +44 (0)20 7991 5072
Email: investorrelations@hsbc.com

Hong Kong – Yafei Tian
Telephone: +852 2899 8909
Email: investorrelations@hsbc.com.hk

Media Relations

UK – Gillian James
Telephone: +44 (0)7584 404 238
Email: pressoffice@hsbc.com

UK – Kirsten Smart
Telephone: +44 (0)7725 733 311
Email: pressoffice@hsbc.com

Hong Kong – Aman Ullah
Telephone: +852 3941 1120
Email: aspmediarelations@hsbc.com.hk