HSBC Holdings plc Annual Results 2024

Georges Elhedery, Group CEO, said:

“Our strong 2024 performance provides firm financial foundations upon which to build for the future, as we prioritise delivering sustainable strategic growth and the best outcomes for our customers. Since becoming CEO, I have focused on simplifying how we operate and injected energy and intent into the way we deliver our strategy. We are creating a simple, more agile, focused bank built on our core strengths. We continue to take deliberate and decisive steps. This includes creating four complementary, clearly differentiated businesses, aligning our structure to our strategy and reshaping our portfolio at pace and with purpose. I have put in place a smaller, core team of exceptionally talented leaders driven by a growth orientated mindset and a firm focus on dynamically managing our costs and capital. We are embedding this approach across the organisation to ensure we are continually focused on these two important principles. Each targeted action we are taking is designed to unlock HSBC’s full potential. We look to the future with confidence and clarity of purpose.”

2024 financial performance (vs 2023)

• Profit before tax rose by $2.0bn to $32.3bn, including a $1.0bn net favourable impact from notable items. In 2024, these included a gain of $4.8bn on the disposal of our banking business in Canada, the impacts of the disposal of our business in Argentina, comprising a $1.0bn loss on disposal, and the recycling of foreign currency reserve losses and other reserves of $5.2bn. In 2023, notable items included an impairment of $3.0bn on our associate, Bank of Communications Co., Limited (‘BoCom’), disposal losses of $1.0bn on Treasury repositioning and risk management and a $1.6bn gain recognised on the acquisition of Silicon Valley Bank UK Limited (‘SVB UK’). Profit after tax increased by $0.4bn to $25.0bn.

• Constant currency profit before tax excluding notable items increased by $1.4bn to $34.1bn, primarily reflecting revenue growth in Wealth and Personal Banking (‘WPB’) and Global Banking and Markets (‘GBM’), partly offset by a rise in operating expenses, in line with our cost growth targets.

• Revenue of $65.9bn was stable. There was growth in revenue from higher customer activity in Wealth in WPB, and in Equities and Securities Financing in GBM. In addition, 2023 included disposal losses of $1.0bn related to Treasury repositioning and risk management. This was offset by the net adverse impact of certain strategic transactions described above, as well as a $0.2bn loss on the early redemption of legacy securities.

• Constant currency revenue excluding notable items rose by $2.9bn to $67.4bn.

• Net interest income (‘NII’) decreased by $3.1bn, reflecting the impact of business disposals and higher funding costs associated with the redeployment of our commercial surplus to the trading book, where the related revenue is recognised in ‘net income from financial instruments held for trading or managed on a fair value basis‘, partly offset by higher NII in HSBC UK, reflecting the benefit of our structural hedge. Banking NII of $43.7bn fell by $0.4bn or 1% compared with 2023, as increased deployment of our commercial surplus to the trading book only partly mitigated the reductions in NII.

• Net interest margin (‘NIM’) of 1.56% decreased by 10 basis points (‘bps’), mainly due to increased deployment of our commercial surplus to the trading book.

• Expected credit losses and other credit impairment charges (‘ECL’) of $3.4bn were stable. ECL were $1.8bn in Commercial Banking (‘CMB’) and $0.2bn in GBM. This included stage 3 charges relating to the commercial real estate sector in mainland China ($0.4bn), the onshore Hong Kong real estate sector ($0.1bn), and a charge related to a single CMB customer in the UK. ECL in WPB were $1.3bn and primarily related to our legal entities in Mexico, Hong Kong and the UK. ECL were 36bps of average gross loans, including loans and advances classified as held for sale (2023: 32bps).

• Operating expenses grew by $1.0bn or 3% to $33.0bn, mainly due to higher spend and investment in technology and the impacts of inflation, partly offset by reductions related to our business disposals in Canada and France, and from lower levies in the UK and the US.

• Target basis operating expenses rose by 5%, in line with our cost growth target. This increase primarily reflected higher spend and investment in technology, and the impact of inflation. 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 French retail banking operations and our banking business in Canada.

• Customer lending balances fell by $8bn on a reported basis but rose by $14bn on a constant currency basis. Growth included lending balance growth in CMB and higher mortgage balances in WPB.

• Customer accounts rose by $43bn on a reported basis, and $75bn on a constant currency basis, with growth across all of our global businesses, primarily in Asia.

• Common equity tier 1 (‘CET1’) capital ratio of 14.9% rose by 0.1 of a percentage point, mainly due to capital generation and a reduction in RWAs through strategic transactions, offset by dividends, share buy-backs and organic balance sheet growth.

• The Board has approved a fourth interim dividend of $0.36 per share, resulting in a total of $0.87 per share in respect of 2024, inclusive of a special dividend of $0.21 per share. We also intend to initiate a share buy-back of up to $2bn, which we expect to complete by our first quarter 2025 results announcement.

4Q24 financial performance (vs 4Q23)

• Reported profit before tax up $1.3bn to $2.3bn. The increase reflected the non-recurrence of an impairment charge in 4Q23 of $3.0bn relating to the investment in our associate BoCom. This was partly offset by a reduction in revenue, which included the recycling of foreign currency losses and other reserves of $5.2bn recognised following the completion of sale of our business in Argentina in 4Q24, while 4Q23 included the impact of an impairment relating to the sale of our retail banking operations in France of $2.0bn as we reclassified these operations as held for sale. On a constant currency basis, profit before tax up $1.5bn to $2.3bn. Reported profit after tax up $0.4bn to $0.6bn.

• Reported revenue down 11% to $11.6bn, due to the recycling of foreign currency losses and other reserves relating to the sale of our business in Argentina, as mentioned above. This was partly offset by the non-recurrence of a 4Q23 impairment relating to the sale of our retail banking operations in France, disposal losses relating to Treasury repositioning and risk management, and the impact of hyperinflationary accounting in Argentina. In addition, revenue increased in Wealth in WPB and in Markets and Securities Services (‘MSS’) in GBM. Constant currency revenue excluding notable items increased by $1.2bn to $16.5bn.

• Reported ECL up $0.3bn to $1.4bn. ECL in 4Q24 comprised charges in CMB of $0.8bn, primarily related to stage 3 exposures which included charges relating to the commercial real estate sector in mainland China of $0.2bn and a charge relating to a single exposure in the UK. Charges in WPB of $0.4bn were concentrated in our legal entities in Mexico and Hong Kong.

• Reported operating expenses stable at $8.6bn, as higher spend and investment in technology and inflation were broadly offset by lower levies in the UK and the US, a reduction in performance related pay and lower costs due to the impact of our disposals in Canada and France.

Outlook

• We have announced measures to simplify the Group and we are focused on opportunities that build on our strong platform for growth.

• We are now targeting a mid-teens return on average tangible equity (‘RoTE’) in each of the three years from 2025 to 2027 excluding notable items, while acknowledging the outlook for interest rates remains volatile and uncertain, particularly in the medium term.

• We expect banking NII of around $42bn in 2025. Our current expectation reflects modelling of a number of market-dependent factors. If changes in these factors impact the output of our modelling, we would update our expectation for 2025 Banking NII in future quarterly results announcements.

• We retain a Group-wide focus on cost discipline. We are targeting growth in target basis operating expenses of approximately 3% in 2025 compared with 2024.

• Our target basis operating expenses for 2025 excludes the direct cost impact of the business disposals in Canada and Argentina, notable items and the impact of retranslating the prior year results of hyperinflationary economies at constant currency.

• Our cost target includes the impact of simplification-related saves associated with our announced reorganisation, which aims to generate approximately $0.3bn of cost reductions in 2025, with a commitment to an annualised reduction of $1.5bn in our cost base expected by the end of 2026. To deliver these reductions, we plan to incur severance and other up-front costs of $1.8bn over 2025 and 2026, which will be classified as notable items. We are focused on opportunities where we have a clear competitive advantage and accretive returns, and we aim to redeploy around $1.5bn of additional costs from non-strategic activities into these areas, over the medium term.

• We expect ECL charges as a percentage of average gross loans to continue to be within our medium-term planning range of 30bps to 40bps in 2025 (including lending held for sale balances).

• Over the medium to long term, we continue to expect mid-single digit percentage growth for year-on-year customer lending balances.

• We expect double-digit percentage average annual growth in fee and other income in Wealth over the medium-term.

• We intend to continue 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.

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-January 2025) and rates of foreign exchange, as well as customer behaviour and activity levels.

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.

For further information contact:

Media Relations

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

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

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