HSBC Holdings plc (LON:HSBA) has announced its 2024 results.
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.
Group Chairman’s shareholder letter
In 2024, global economic growth was mixed. In the West, the US remained an outperformer, while growth across Europe was disappointing. In Asia and the Middle East, there was broadly steady growth. With inflation falling and with signs of the labour market softening, the US Federal Reserve was able to start cutting rates, as did most advanced economies.
This was against a backdrop of significant geopolitical uncertainty, heightened by numerous and consequential elections across the world. The war in Ukraine, now entering its fourth year, and the conflicts and continuing tensions in the Middle East, have had a tragic human impact. Our thoughts are with all those who have suffered and continue to experience the devastating consequences.
In this context, our focus is on our customers, leveraging our global network to help them navigate the challenges and capture the opportunities that emerge. That approach, combined with the disciplined execution of our strategy, delivered another strong financial performance and increased returns in 2024.
And we are very well positioned for the future.
HSBC’s 160th Anniversary
2025 will mark HSBC’s 160th anniversary.
In 1865, HSBC’s founders started out with a clear and simple objective: to establish a bank in Hong Kong and Shanghai that would facilitate local and international trade, connecting East and West, and the many places in-between.
That objective is as relevant and significant today as it was then.
2024 progress and performance
In 2024, we delivered profit before tax of $32.3bn – an increase of $2.0bn compared with 2023. Our return on average tangible equity was 14.6%, or 16% excluding the impact of notable items.
We delivered increased returns for our shareholders. The Board approved a fourth quarterly dividend of $0.36 per share, bringing the total dividend announced for 2024 to $0.87 per share. This includes the special dividend of $0.21 per share that was paid in June following the completion of the sale of HSBC Bank Canada. In addition, we announced three share buy-backs in respect of 2024 worth a total of $9bn. And today, we announced a further share buy-back of up to $2bn.
Since the start of 2023, we have repurchased 11% of the issued share count. Combined with our sustained levels of profitability, this led to greater earnings and dividends per share for our shareholders.
Dividends paid in 2024, together with a more than 20% increase in the share price, delivered a total shareholder return for the year of more than 30%.
Our performance demonstrates that our strategy is working. To maintain, and indeed accelerate, the momentum, we are being very deliberate in creating investment capacity for priority areas, focusing on long-term strategic growth.
Optimising cost and capital allocation, we completed the sale of our businesses in Canada, Russia, Argentina, and Armenia, as well as our retail banking operations in France and Mauritius. We announced the planned sale of our business in South Africa and of our private banking business in Germany, as well as the planned sale of our life insurance business in France.
In parallel, our strategic investments are yielding significant results. In Wealth, for instance, revenue grew by 18% in 2024, including a 21% increase in fee and other income. The continued inflow of Net New Invested Assets and growth in total customers point to the material upside opportunity. In Hong Kong, for instance, we added approximately 800k new-to-bank customers.
At the same time, we secured multiple additional licences to expand our operations in mainland China. In India, we received an approval earlier this year to open bank branches in 20 new cities that are at the centre of the expanding wealth and international opportunity.
We will continue to focus on and invest in growth opportunities where we have a clear competitive advantage.
Leadership and Board Changes
Following Noel Quinn’s decision to retire as Group Chief Executive, the Board ran a rigorous and robust process to appoint his successor.
I would like to once again pay tribute to Noel’s exceptional leadership and thank him for his unwavering commitment and dedication to HSBC during his 37 years of service. We wish him the very best in all of his future endeavours.
In September, Georges Elhedery became our Group Chief Executive. He brings a wealth of experience and an outstanding track record of delivery, achieved over a career spent working in Asia, the Middle East and Europe.
In a little over five months, he has already made his mark.
From 1 January 2025, we began operating through four businesses: Hong Kong, the UK, Corporate and Institutional Banking, and International Wealth and Premier Banking. The objective is to create a simpler and more dynamic organisation – with faster decision-making and clear lines of accountability.
Georges was succeeded as Group Chief Financial Officer by Pam Kaur, who joined the Board as an Executive Director, having previously served as Group Chief Risk and Compliance Officer.
At the 2024 Annual General Meeting (‘AGM’), David Nish retired from the Board. David made invaluable contributions over eight years, particularly as Chair of the Group Audit Committee and as Senior Independent Director. Ann Godbehere took over as Senior Independent Director. Ann’s extensive financial services experience, over a 30-year career spanning insurance, retail and private banking, and wealth management, positions her very well for this role. Brendan Nelson took over as Chair of the Group Audit Committee. His UK and international financial and auditing expertise and experience are enormously valuable.
In 2024, the Board held meetings in mainland China, Dubai, Singapore, New York, and London. On each occasion, we had the privilege and pleasure to meet with valued clients, government officials, regulators, and colleagues.
Our AGM in London and the Informal Meeting of our Hong Kong Shareholders provided substantive opportunities to engage with our shareholders, on important issues related to the Group.
Global outlook
The economic outlook remains uncertain with potential downside risks to global growth from trade frictions and supply chain disruptions. Inflation has declined but is proving stubborn and could be impacted by oil and gas prices, as well as any trade tariffs.
Global growth is expected to remain fairly stable in 2025, with the US still likely to remain the major engine of growth. However, policy priorities are adding to uncertainties regarding growth prospects around the world. Already, it appears that the improvement in world trade growth may be starting to falter.
In China, the package of fiscal and monetary measures announced in the final quarter of 2024 was welcome and helped it reach its annual target of ‘around 5%’ GDP growth. Aided by its transformation to a consumption-led and innovation-focused economic model, we expect it to deliver a comparable performance in 2025. Hong Kong should also continue to expand, with its growth directly linked to mainland China.
Elsewhere in Asia, changing supply chains and resilient local demand helped to drive growth in a number of markets, including India. Over the longer term, the demographic dividend will benefit countries like India and markets across South and Southeast Asia.
As this happens, we also continue to see great potential in the fast-growing corridor between Asia and the Middle East, where strong demographics combine with large scale capital spending on infrastructure and further diversification, which are set to continue.
In Europe, with inflation pressures easing and interest rates on a downward trajectory, consumer spending should rise. As a result, we expect the Eurozone to expand this year. Meanwhile, the new UK government is pursuing a pro-growth agenda, which we fully support.
Our people
I want to end by expressing the Board’s immense appreciation and gratitude to all our colleagues for driving our Group forward.
All that we delivered in 2024 was only made possible by their sustained efforts, energies, and execution focus. They are the lifeblood of the HSBC Group, serving our customers and creating value for shareholders.
Sir Mark E Tucker
Group Chairman
19 February 2025
Group CEO’s shareholder letter
Dear fellow shareholders,
The opportunity to lead HSBC is a privilege. Even more so as we celebrate our 160th anniversary. Like each of my predecessors, I see my responsibility as delivering sustainable strategic growth for our shareholders. This begins by putting our customers at the centre of everything we do. Our financial strength, international network, heritage, and brand mean we build upon firm foundations.
We look to the future with confidence.
We begin from a position of strength, which is reinforced by our 2024 performance. During the year, we delivered a return on average tangible equity (‘RoTE’) of 14.6%. This includes several notable items, in particular related to strategic disposals. Excluding these, our RoTE was 16.0%, achieving our ‘mid-teens’ target. Our common equity tier 1 (‘CET1’) capital ratio was 14.9%, reflecting our long-standing financial strength. With our continued focus on cost discipline, we managed cost growth on our target basis of around 5%, which was in line with our targeted cost growth. This strong performance enabled us to announce $26.9 billion in returns to our shareholders through dividends and share buy-backs, which we expect to remain central to our strategy.
Simple, more agile, focused
The world in which we operate is changing quickly. We are adapting to help our customers navigate new complexities. By doing so, we will open up a world of opportunity as we serve their needs, delivering on our strategy.
Since assuming the role in September, I have focused on injecting energy and intent into the way we deliver our strategy. We are being more agile in the way we allocate our resources and invest to prepare for the future. That includes retiring non-strategic assets and embracing the productive power of new technologies and tools to modernise HSBC and enhance the way we serve our customers.
We have renewed vigour in finding the efficiencies that will optimise our resource allocation, be that geographical, business line or balance sheet. This will enhance the way we actively and dynamically manage costs and capital, and target investments.
We will be guided by three overarching priorities:
– Focus on our customers, delivering high levels of satisfaction;
– Drive long-term growth by focusing on our strengths, increasing our leadership and market share in the areas where we can generate attractive returns;
– Simplify our structure and operating model. Reshape and rationalise our portfolio, to meet the needs of a fast-changing world.
To achieve this, I have put in place a smaller, core team of exceptionally talented leaders. They are each committed to fostering a culture of excellence for our colleagues, driven by a growth-orientated mindset. HSBC’s many talented colleagues around the world are key to delivering the exceptional customer experience that will drive our future growth.
We have also simplified the organisation in two important ways.
First, by moving away from a complex matrix governance structure built around three business lines and five geographical regions to create four new businesses. Each firmly rooted in our core strengths:
– Corporate and Institutional Banking, which combines our two wholesale businesses;
– International Wealth and Premier Banking, to focus on accelerating the build out of our global wealth proposition;
– Our two home markets of Hong Kong and the UK, where we have scale and market-leading positions.
HSBC’s supporting infrastructure is being simplified and realigned to enable these four businesses to grow.
Simply put, we are aligning our structure to our strategy.
Second, we are significantly improving our operating model, led by a tighter team at the Group Operating Committee, that will:
– Provide clarity of accountability, empower colleagues to make faster decisions and accelerate the pace at which we generate greater productivity;
– Make HSBC simple, with fewer management lines and layers, and less committees, designed to reduce bureaucracy, create closer collaboration, emphasise teamwork, and facilitate the flow of ideas and innovation;
– Adapt quickly to the factors that are shaping the economies and industries in which our customers operate;
– Sharpen and strengthen our focus on capital efficiency and firm-wide risk management.
This will create a step change in the way we work, the way we serve customers and the way we generate sustainable strategic growth, driving higher returns for our shareholders.
In short, unlocking HSBC’s full potential.
Designed to deliver strong, sustainable strategic growth
For 160 years, HSBC has been defined by its financial strength and international network. Both remain enablers of everything we do. What is changing is the clarity, speed and intensity with which we are repositioning HSBC around our four complementary, clearly differentiated businesses.
Corporate and Institutional Banking (‘CIB’) is an international wholesale bank with significant competitive advantages. It has a powerful deposit franchise with financing capabilities supported by the strength of our balance sheet and our network. It has the products and skills required to serve the global banking needs of international corporate clients, particularly in transaction banking where we continue to invest. This positions us to better capture global and intra-regional flows as supply chains reconfigure, new trade routes emerge, economies grow, and customers’ expectations of financial services evolve.
The future economy will require financing and investment in sectors such as advanced technologies, specifically digitalisation, computing and generative AI, as well as clean energy and healthcare. CIB is well positioned to facilitate this by helping entrepreneurs to secure the capital they need to build the businesses of the future and by supporting our customers as they look to decarbonise.
International Wealth and Premier Banking (‘IWPB’) is ideally placed to capture the increasing number of affluent and high-net-worth customers. Especially those with international banking needs who seek new investment opportunities to help them to protect and grow their wealth. Our recognised brand, financial strength and complementary footprints across Asia and the Middle East serve to reinforce HSBC’s position in the world’s fastest-growing wealth markets. We also have an asset management business with distinct specialism in both regions offering customers access to investment opportunities across asset classes.
The Hong Kong and UK businesses give us strong platforms in our home markets. We serve personal banking customers and small and medium enterprises in these businesses. In Hong Kong specifically, where HSBC was founded, Hang Seng Bank, a customer-centric community bank, is a strategically important investment of the HSBC Group, which enhances the strength of our franchise and market-leading position. We also have a fast-growing insurance manufacturing business in Hong Kong, leveraging the inflows that are propelling Hong Kong to become the leading international wealth hub. In the UK, we have a leading retail, commercial and innovation-focused bank which continues to build market share.
Customers in Hong Kong and the UK with global banking needs will be able to access the power of our international network through our CIB and IWPB businesses, that are anchored in these two leading international financial centres.
Delivering on our priorities to customers and shareholders
HSBC is a highly connected, global organisation. Our international network is a significant differentiator.
By refocusing on our core strengths, we are creating a simple, more agile, focused organisation structured to better serve our customers and deliver for our shareholders.
We have taken the first deliberate and decisive steps. We continue to move at pace and with a relentless focus on actively managing our costs. Not as a one off, but as an embedded mindset.
How we deliver on our three priorities is equally important. We are instilling a culture of excellence, leadership and accountability throughout the firm. We are also undergoing a comprehensive transformation of our operations, modernising our infrastructure, and investing in technology such as AI, generative AI, data and analytics. This will enhance customer experience as well as drive operational excellence.
The aim being to create a refocused, reinvigorated HSBC, firmly rooted in four complementary businesses with the ambition to generate high levels of total shareholder returns.
Today’s actions define a confident future
I am confident about our future and what we can achieve.
As we celebrate our 160th anniversary, our history and heritage stand us in good stead. In so many ways, adapting to new economic realities and technologies is what we have always done. It brings out the best in our people and culture, especially when acting as a trusted advisor to our customers as they navigate the world’s economic uncertainties and look towards new opportunities.
As we look to the future, our strategic priorities are clear, our leadership team is now in place, supported by a simplified structure that enables action.
We have clarity on who we are and what we seek to achieve. We are driven by a precision of purpose that guides the way we do business, the values we uphold and the way we serve our customers, colleagues and communities.
We are prioritising a high-performance culture where employees are passionate about what they can achieve and rewarded for their strong customer focus, skills, ambition and initiative. We will invest in our people, one of our most valuable assets, providing them with expansive career opportunities and supporting them in developing future-focused skills, establishing HSBC as an employer of choice and a great place to work.
A strong culture and effective leadership will be key to our long-term success.
I would like to thank all of my colleagues for their valuable contributions to our results. It is a privilege to work with such talented people. Their dedication, commitment, and desire to deliver for our customers differentiates HSBC and is key to delivering long-term growth.
The actions we are taking will have clear and tangible impact. Our ambition is to unlock HSBC’s full potential for the benefit of all our stakeholders, provide excellent customer outcomes that enhance our franchise and brand, generating the strategic growth that will deliver attractive returns for you, our shareholders.
Georges Elhedery
Group CEO
19 February 2025
