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HSBC's Q4 Pre-Tax Earnings Jump, $1.5B Cost-Savings Plan Revealed
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HSBC Holdings (HSBC - Free Report) reported a fourth-quarter 2024 pre-tax profit of $2.23 billion, up substantially from $977 million in the prior-year quarter.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
Results were aided by lower expenses. However, a fall in revenues, higher expected credit losses and other credit impairment charges (ECL) were the undermining factors.
HSBC’s Revenues Down, Expenses Dip
Total revenues were $11.56 billion, down 11.2% year over year. The fall was primarily due to lower other operating income.
Operating expenses declined marginally to $8.6 billion.
In the quarter under review, ECL was $1.36 billion, up 32.1% year over year.
The common equity tier 1 (CET1) ratio as of Dec. 31, 2024, was 14.9%, up from 14.8% as of Dec. 31, 2023. The leverage ratio was 5.6%, stable with the prior-year quarter.
HSBC’s Quarterly Performance by Business Lines
Wealth and Personal Banking: The segment reported $2.5 billion in pre-tax profit, up significantly from $175 million in the year-ago period. The rise was driven by an increase in total operating income.
Commercial Banking: The segment reported a pre-tax profit of $2.4 billion, down 3.9% from the year-ago quarter. Higher ECL charges and a rise in expenses led to the decline.
Global Banking and Markets: Pre-tax profit was $1.4 billion, which increased 37.4% year over year. The jump was driven by higher total operating income.
Corporate Centre: The segment reported a pre-tax loss of $4 billion, compared with a $2.7 billion loss in the year-ago quarter.
Outlook for HSBC
For 2025, management expects banking net interest income (NII) of $42 billion.
HSBC targets year-over-year operating expense growth of 3% for 2025.
HSBC expects to incur $1.8 billion in expenses by 2026-end related to the business overhaul. These efforts are likely to result in annualized cost savings of $1.5 billion by the end of next year.
For 2025, ECL charges, as a percentage of average gross loans, are expected to be between 30 and 40 basis points.
HSBC expects a return on average tangible equity in the mid-teens from 2025 to 2027, which excludes the impacts of notable items.
The company intends to manage the CET1 ratio within its medium-term target of 14-14.5%.
HSBC expects a dividend payout ratio of 50% for 2025.
The company intends to initiate a share buyback program of up to $2 billion, which will likely be completed by April-end.
Our View on HSBC
HSBC’s strong capital position, initiatives to strengthen digital capabilities, extensive network and efforts to improve operating efficiency through business simplification plan are expected to support its financials. Although the company’s initiatives to improve market share in Asia will support financials, these will lead to a rise in expenses.
HSBC Holdings Stock Price, Consensus and EPS Surprise
Barclays (BCS - Free Report) reported fourth-quarter 2024 net income attributable to ordinary equity holders of £956 million ($1.22 billion) against a net loss of £111 million in the prior-year quarter.
An increase in revenues (driven by solid investment banking [IB] performance), lower operating expenses (showing the success of cost-efficiency initiatives) and a solid balance sheet supported the results. However, BCS recorded a rise in credit impairment charges in the quarter.
UBS Group AG (UBS - Free Report) reported a fourth-quarter 2024 net profit attributable to shareholders of $770 million against a net loss of $279 million in the prior-year quarter.
Results were driven by the strong performances of the Global Wealth Management, Asset Management and Investment Bank divisions. The decrease in operating expenses was another positive for UBS. However, an increase in credit loss expenses was a headwind.
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HSBC's Q4 Pre-Tax Earnings Jump, $1.5B Cost-Savings Plan Revealed
HSBC Holdings (HSBC - Free Report) reported a fourth-quarter 2024 pre-tax profit of $2.23 billion, up substantially from $977 million in the prior-year quarter.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
Results were aided by lower expenses. However, a fall in revenues, higher expected credit losses and other credit impairment charges (ECL) were the undermining factors.
HSBC’s Revenues Down, Expenses Dip
Total revenues were $11.56 billion, down 11.2% year over year. The fall was primarily due to lower other operating income.
Operating expenses declined marginally to $8.6 billion.
In the quarter under review, ECL was $1.36 billion, up 32.1% year over year.
The common equity tier 1 (CET1) ratio as of Dec. 31, 2024, was 14.9%, up from 14.8% as of Dec. 31, 2023. The leverage ratio was 5.6%, stable with the prior-year quarter.
HSBC’s Quarterly Performance by Business Lines
Wealth and Personal Banking: The segment reported $2.5 billion in pre-tax profit, up significantly from $175 million in the year-ago period. The rise was driven by an increase in total operating income.
Commercial Banking: The segment reported a pre-tax profit of $2.4 billion, down 3.9% from the year-ago quarter. Higher ECL charges and a rise in expenses led to the decline.
Global Banking and Markets: Pre-tax profit was $1.4 billion, which increased 37.4% year over year. The jump was driven by higher total operating income.
Corporate Centre: The segment reported a pre-tax loss of $4 billion, compared with a $2.7 billion loss in the year-ago quarter.
Outlook for HSBC
For 2025, management expects banking net interest income (NII) of $42 billion.
HSBC targets year-over-year operating expense growth of 3% for 2025.
HSBC expects to incur $1.8 billion in expenses by 2026-end related to the business overhaul. These efforts are likely to result in annualized cost savings of $1.5 billion by the end of next year.
For 2025, ECL charges, as a percentage of average gross loans, are expected to be between 30 and 40 basis points.
HSBC expects a return on average tangible equity in the mid-teens from 2025 to 2027, which excludes the impacts of notable items.
The company intends to manage the CET1 ratio within its medium-term target of 14-14.5%.
HSBC expects a dividend payout ratio of 50% for 2025.
The company intends to initiate a share buyback program of up to $2 billion, which will likely be completed by April-end.
Our View on HSBC
HSBC’s strong capital position, initiatives to strengthen digital capabilities, extensive network and efforts to improve operating efficiency through business simplification plan are expected to support its financials. Although the company’s initiatives to improve market share in Asia will support financials, these will lead to a rise in expenses.
HSBC Holdings Stock Price, Consensus and EPS Surprise
HSBC Holdings plc price-consensus-eps-surprise-chart | HSBC Holdings plc Quote
Currently, HSBC carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Performance of HSBC Competitors
Barclays (BCS - Free Report) reported fourth-quarter 2024 net income attributable to ordinary equity holders of £956 million ($1.22 billion) against a net loss of £111 million in the prior-year quarter.
An increase in revenues (driven by solid investment banking [IB] performance), lower operating expenses (showing the success of cost-efficiency initiatives) and a solid balance sheet supported the results. However, BCS recorded a rise in credit impairment charges in the quarter.
UBS Group AG (UBS - Free Report) reported a fourth-quarter 2024 net profit attributable to shareholders of $770 million against a net loss of $279 million in the prior-year quarter.
Results were driven by the strong performances of the Global Wealth Management, Asset Management and Investment Bank divisions. The decrease in operating expenses was another positive for UBS. However, an increase in credit loss expenses was a headwind.