HSBC Holdings said it would invest more resources in Hong Kong's wealth-management products and services in the coming years, as the city's biggest commercial bank restructures to cut costs and grow in its largest market in terms of revenue.
The 160-year-old bank plans to redeploy US$1.5 billion from "low-return" markets to Hong Kong and other parts of Asia, HSBC's CEO Georges Elhedery said on Wednesday after unveiling a 2 per cent growth in 2024 net profit.
As part of the plan, HSBC has started to scale down its investment banking and capital markets activities in the US, UK and Europe. It also plans to sell its private bank in Germany and its insurance business in France.
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"We will reinvest these funds in our areas of growth, namely in wealth [management] in Asia, particularly Hong Kong," Elhedery said via an online media briefing, in his first set of annual financial results since taking HSBC's helm in September from Noel Quinn.
"Hong Kong is on track to becoming the world's largest cross-border wealth hub, [inasmuch] as Hong Kong is also a global financial centre. There are definitely a lot of investments that we will put in this market to support the growth here."
Georges Elhedery, Group Chief Executive, HSBC Holdings at the Global Financial Leaders' Investment Summit on 19 November 2024. Photo: Dickson Lee alt=Georges Elhedery, Group Chief Executive, HSBC Holdings at the Global Financial Leaders' Investment Summit on 19 November 2024. Photo: Dickson Lee>
The London-based bank, one of Europe's largest by assets, generates most of its revenue from Asia - particularly Hong Kong - which is its largest market.
"We are very positive about the Hong Kong economic outlook," he said, after kicking off his presentation with Lunar New Year greetings in Mandarin Chinese. "We had a fantastic franchise in Hong Kong where we have grown our customer base by adding 800,000 new customers."
A logo of HSBC on its headquarters at the Central district in Hong Kong. Photo: Reuters. alt=A logo of HSBC on its headquarters at the Central district in Hong Kong. Photo: Reuters.>
Pre-tax profit from the bank's Hong Kong operations, including its Hang Seng Bank unit, grew 9.5 per cent last year to US$11.69 billion. HSBC's 2024 pre-tax profit rose 6.6 per cent to US$32.3 billion, surpassing the consensus market estimate of US$31.7 billion.
Net profit rose 2.2 per cent to US$22.9 billion, or US$1.25 per share, missing the US$24.1 billion expected by the analysts' consensus tracked by Bloomberg. Still, the net profit was in line with the US$22.67 billion consensus expected in HSBC's in-house survey of 18 analysts.
Besides Hong Kong, HSBC will invest more in Singapore, mainland China and India where the bank is a key provider of wealth management services, he said.
The escalators at HSBC Bank's headquarters in Central on 30 October 2023. Photo: Elson Li alt=The escalators at HSBC Bank's headquarters in Central on 30 October 2023. Photo: Elson Li>
"We are also looking to invest more in small and medium-sized enterprises in the UK," Elhedery said, adding that the lender would also invest more in artificial intelligence (AI) and generative AI to enhance productivity.
HSBC also unveiled a new US$2 billion share buy-back programme, matching the same amount announced a year earlier. The bank spent US$9 billion in 2023 on share buy-backs.
The bank will pay 36 US cents per share in fourth-quarter dividends, bringing the total for 2024 to 87 US cents, more than the 61 US cents paid in 2023. HSBC shares rose 1.4 per cent to close at HK$88.40, outperforming the 0.1 per cent drop in the Hang Seng Index.
New currency notes issued by HSBC on display at the bank's Mong Kok branch on 14 January 2025, ahead of the Lunar New Year holiday. Photo: Eugene Lee alt=New currency notes issued by HSBC on display at the bank's Mong Kok branch on 14 January 2025, ahead of the Lunar New Year holiday. Photo: Eugene Lee>
"Since becoming CEO, I have focused on simplifying how we operate and injecting energy and intent into the way we deliver our strategy," Elhedery said. "We are creating a simple, more agile [and] focused bank built on our core strengths."
Pre-tax profit rose 133 per cent to US$2.3 billion during the fourth quarter, attributable mainly to a US$3 billion impairment charge that HSBC took in the same period in 2023 from the sale of its stake in Bank of Communications.
The group's total revenue fell 0.3 per cent last year to US$65.8 billion from US$66.1 billion a year earlier. Net interest margin, an important measure of profitability, fell 10 basis points from a year earlier to 1.56 per cent, due to interest rate cuts since September.
Elhedery also announced a plan to generate US$300 million in cost cuts this year and US$1.5 billion of savings by the end of 2026, as he reorganises the top echelons of the bank. To achieve that, HSBC planned to incur US$1.8 billion in severance and other upfront costs by 2026, he added.
"The costs [saved] represent about 8 per cent of our staff cost, but [there] will be fewer people affected because [the cuts apply] to senior people, [and are] therefore weighted towards the higher earners," Elhedery said.
