HSBC Holdings plc Q2 FY2025 earnings call

Half-Year Performance

• Revenue in first half grew 6% to $35.4 billion, profit before tax up 5% to $18.9 billion, annualized ROTE 18.2% up 1.2% y-o-y.

External Environment

• Strong balance sheet and deposit base ($83 billion growth from last year), global connectivity for trade and investment, expertise in wealth markets in Asia and Middle East.

Organizational Simplification

• On track to deliver $1.5 billion of simplification saves by 2027, with $0.4 billion in P&L in 2025 revised up from $0.3 billion.

Exit of Non-Strategic Activities

• Sold businesses in Uruguay, U.K. life insurance, etc.; Bangladesh retail business to wind down in H2 2025.

Investments

• Expanded wealth centers in Hong Kong and U.K., launched HSBC TradePay and Tokenised Deposit Services, modernizing with AI and GenAI for efficiency.

The four businesses performed strongly. In the Hong Kong home market, they attracted 100,000 new-to-bank customers monthly and had solid deposit inflows. The U.K. home market loan book grew by $6 billion over the quarter, with commercial banking loans up $3.5 billion. In Wealth, fee and other income grew, with $22 billion of net new invested assets in Q2, $11 billion in Asia. Wholesale transaction banking saw fee and other income grow 5%, with trade fees up 4% and securities services up 3%. Revenue contribution: Banking NII driven by $1.7 trillion deposit base, Wealth and Wholesale transaction banking contributed to fee and other income growth.

ROTE

• Reaffirmed mid-teens return on tangible equity guidance for 2025, '26, and '27.

Banking NII

• Reiterated full year banking NII guidance of around $42 billion.

ECL

• Revised full year ECL guidance to around 40 basis points.

Dividends and Buyback

• Announced $0.10 dividend per share and share buyback of up to $3 billion.

• Hong Kong commercial real estate has short-term challenges. - HIBOR volatility impacts Banking NII. - Tariff-related uncertainties affect trade and revenue. - Model updates and ECL calibration pose risks.

Q: On your banking NII guidance of $42 billion and ECL guidance range of 30 to 40 basis points, can you provide more color?

A: Manveen Kaur addresses that the $42 billion NII guidance includes HIBOR expectations, and the ECL guidance range reflects updated outlooks including Hong Kong commercial real estate.

Q: How do you view the sustainability of non-interest income momentum, especially in FX and Wealth?

A: Georges Elhedery and Manveen Kaur state that Wealth has six consecutive quarters of double-digit growth driven by investments and client activity, while FX benefits from customer activity due to volatility and remains a core capability.