HSBC Holdings PLC (HSBC) Full Year 2024 Earnings Call Highlights: Record Profits and Strategic ...

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Thu, Feb 20, 2025, 12:01 AM 4 min read

Profit Before Tax (Full Year 2024): $32.3 billion, or $34.1 billion excluding notable items.
Return on Tangible Equity (Full Year 2024): 14.6%, or 16% excluding notable items.
Shareholder Distributions (Full Year 2024): $26.9 billion, including $0.87 per share of dividends and $11 billion of share buybacks.
Annualized Savings Target by 2026: $1.5 billion through simplification and deduplication.
Profit Before Tax (Q4 2024): $2.3 billion, or $7.3 billion excluding notable items.
Revenue (Q4 2024): $16.5 billion, up $1.2 billion year-on-year, excluding notable items.
Banking Net Interest Income (NII) Expectation for 2025: Around $42 billion.
Expected ECL Charge (2024): 36 basis points of average loans.
Cost Growth Expectation for 2025: Around 3% compared with 2024 on a target basis.
Loan Balances (Q4 2024): Stable.
Deposit Growth (Q4 2024): Up 3%.
CET1 Ratio (End of 2024): 14.9%.

Warning! GuruFocus has detected 5 Warning Sign with BICEF.

Release Date: February 19, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

HSBC Holdings PLC (NYSE:HSBC) reported a record profit before tax of $32.3 billion for 2024, or $34.1 billion excluding notable items.
The company achieved a 14.6% return on tangible equity, or 16% excluding notable items, aligning with its mid-teens target.
HSBC Holdings PLC (NYSE:HSBC) announced $26.9 billion in shareholder distributions for 2024, including $0.87 per share in dividends and $11 billion in share buybacks.
The bank has simplified its structure, leading to an expected $1.5 billion in annualized savings by the end of 2026, primarily through deduplication of roles.
HSBC Holdings PLC (NYSE:HSBC) is targeting a mid-teens return on tangible equity for 2025, 2026, and 2027, supported by strategic growth initiatives and cost efficiencies.

Negative Points

The company plans to incur around $1.8 billion in severance and other upfront costs by the end of 2026 due to restructuring efforts.
HSBC Holdings PLC (NYSE:HSBC) faces challenges from a volatile interest rate environment, which could impact its financial performance.
The bank's decision to wind down M&A and ECM activities in the UK, Europe, and the US may lead to short-term revenue impacts.
There is a risk of disruption in global trade patterns, which could affect HSBC Holdings PLC (NYSE:HSBC)'s transaction banking business.
The competitive landscape in the wealth management sector, particularly in Asia and the Middle East, poses challenges for HSBC Holdings PLC (NYSE:HSBC)'s growth ambitions.

Q & A Highlights

Q: With the cost saves, where do we expect the Corporate & Institutional Banking (CIB) Return on Tangible Equity (RoTE) to trend over the next couple of years? A: Georges Elhedery, CEO: We haven't given specific medium-term returns for CIB, but the business will benefit from significant cost synergies due to the merger of two wholesale businesses. We expect improvements through cost savings, capital allocation efficiencies, and increased fee income. CIB is a leading business in Wholesale Transaction Banking and has a strong deposit franchise, which supports its profitability.

Q: How should we think about incremental technology or new apps in International Wealth and Premier Banking (IWPB) to gain market share in cross-border wealth? A: Georges Elhedery, CEO: IWPB is a major growth engine, especially in Hong Kong, which is becoming the world's largest cross-border wealth hub. We are investing in relationship managers, wealth centers, and technology capabilities. Our brand is strong in Asia and the Middle East, and we aim to capture more cross-border flows and increase our market share.

Q: Can you elaborate on the $1.5 billion reallocation of costs and the expected return on investment? A: Georges Elhedery, CEO: The reallocation is from nonstrategic or low-return activities to areas with competitive advantages and better returns, such as Wealth and Transaction Banking. The wind down of M&A and ECM activities will free up $300 million for reinvestment. These areas are fee-driven with low RWA impact, and we expect higher returns from these investments.

Q: What are your thoughts on the medium-term ambition for the CET1 ratio and cost savings? A: Pam Kaur, CFO: We are comfortable operating within a 14% to 14.5% CET1 ratio range. The $1.5 billion cost savings will be taken to the bottom line, with $300 million recognized in 2025. We expect full savings by 2027, with severance costs incurred upfront.

Q: How do you view the Global Trade and Wealth Management business trends? A: Georges Elhedery, CEO: Global Trade is expected to grow at low single-digit percentages, with reconfigured trade routes benefiting our presence in key markets. Wealth in Asia and the Middle East is projected to grow at high single-digit to 10% CAGR over the next five years. We aim to increase our market share in these regions by enhancing product capabilities and customer reach.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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