HSBC posted annual profit on Wednesday that beat estimates, helped by increased revenue in wealth and markets businesses, and set stiff cost-cut targets as its new CEO implements a revamp of the Asia-focused bank to boost returns.
The Asia-focused lender also announced a new $2 billion share buyback which it plans to complete before next earnings.
The figures come against the backdrop of CEO Georges Elhedery embarking on costly restructuring just as the business outlook is muddied by divergence in central bank interest rate policies, with the euro zone having room to cut rates, the U.S. holding steady and Japan expected to raise.
Elhedery, who took the helm in September last year, has been taking steps to boost returns and tighten the London-headquartered bank’s focus on Asia, where it earns the bulk of its profit.
HSBC reported profit before tax for 2024 of $32.3 billion, as income withstood the impact of falling interest rates. That compared with $30.3 billion a year earlier and the $31.7 billion average of analyst estimates compiled by the bank.
The bank said it aimed to generate about $300 million of cost reductions in 2025, with a commitment to an annualised reduction of $1.5 billion in cost base expected by the end of 2026.
“We have renewed vigour in finding the efficiencies that will optimise our resource allocation, be that geographical, business line or balance sheet,” Elhedery said in the bank’s earnings statement.
“This will enhance the way we actively and dynamically manage costs and capital, and target investments.”
The Hong Kong-listed shares of HSBC rose more than 1% in afternoon trade after the earnings announcement, while the broader market index was down 0.1%.
“Plans to trim personnel expense by 8% over 2025 and 2026 are positive but I don’t see a lot of new eye-catching overhaul or cost cutting measures in the release. That’s not necessarily a bad thing – increasing efficiency at a bank like HSBC is a matter of many small and midsize details that have to be well coordinated,” Senior Equity Analyst Michael Makdad at Morningstar told Reuters.
HSBC said it was aiming for a performance target of a mid-teens return on average tangible equity for each of the three years from 2025 to 2027, while noting the outlook for interest rates remains volatile and uncertain in the medium term.
In 2024, wealth and personal banking, its biggest earner, delivered $12.2 billion in profit before tax, a 5.2% rise from a year earlier, as it won new customers and sold more wealth management products.
Profit in global banking and markets rose nearly 27% to $7.1 billion, its earnings filing showed.
HSBC also said it will pay a fourth interim dividend of $0.36 a share, resulting in a total of $0.87 per share in 2024, which includes a special dividend of $0.21 a share for the disposal of its Canadian business.
Elhedery, a career HSBC insider promoted from the CFO role, has moved faster than some analysts and investors expected to shake up the bank by slashing the ranks of senior managers and reorganising operating divisions along East-West lines.
He cut the mergers-and-acquisitions and equity capital markets teams in Europe and the Americas in the bank’s biggest investment banking retrenchment in decades, accelerating a pivot toward Asian markets.
(This story has been corrected to say the special dividend is a part of the 2024 full dividend payment, in paragraph 14)
(Reporting by Selena Li and Sumeet Chatterjee）
