HSBC Holdings plc Q4 FY2025 earnings call

Georges Elhedery discussed strong 2025 performance, execution of 3 strategic priorities (simple and agile, drive customer centricity, deliver focused sustainable growth). Simplification saves $1.5 billion, 11 business or market exits. Net Promoter Scores improved in home markets, Hong Kong added 1.1 million new to bank customers, U.K. business lending grew 13%. Privatization of Hang Seng Bank enables scaling capabilities. Investing in AI, culture, and technology. Manveen Kaur talked about strong fourth quarter results, revenue growth, profit before tax increase, customer deposit balances, return on tangible equity, cost discipline, capital and distributions, business segment performance, privatization of Hang Seng Bank details, banking NII, wholesale transaction banking, Wealth details, credit, costs, customer deposits and loans, capital, full year defaults, new targets, and guidance for 2026.

Group revenues grew 5%. Profit before tax rose 7% to $36.6 billion. Return on tangible equity was 17.2%. Deposit balances grew 5% with growth in each of 4 businesses. Transaction Banking fee and outcome grew 4%, Wealth grew 24%. Completed $13.7 billion privatization of Hang Seng Bank. Full year ordinary dividend per share $0.75, up 14% on 2024. Each of 4 businesses grew revenues, deposits, and returned mid-teens or better return on tangible equity. Banking NII full year $44.1 billion, Q4 $11.7 billion grew $0.7 billion. Wealth fee and other income grew 20% to $2.1 billion, new disclosures on Wealth balances and net new money. ECL charge this quarter $0.9 billion, 2026 ECL guidance around 40 basis points. Cost growth 3% in full year 2025, guide for 1% cost growth in 2026.

Target revenues growing year-on-year every year, rising to 5% in 2028 excluding notable items. Target return on tangible equity of 17% or better each year from 2026 to 2028 excluding notable items and dividend payout ratio of 50% each year excluding material notable items. 2026 banking NII at least $45 billion, ECL charge around 40 basis points, 1% cost growth on target basis, reallocation costs increase to circa $1.8 billion with $0.9 billion benefits from Hang Seng Bank by 2028 including $0.6 billion restructuring charge.

Potential impact of interest rate cuts and balance sheet reduction, macroeconomic uncertainties, possible risks from private credit or other macro events, risks related to commercial real estate in Hong Kong and China, and uncertainties around the realization of synergies and upside from Hang Seng Bank privatization.

Q: Nick Lord from Morgan Stanley asked about revenue target by 2028 and Wealth trajectory.

A: Georges Elhedery and Manveen Kaur responded on growth opportunities in various businesses, investment in growth areas, and Wealth and Transaction Banking growth.

Q: Joseph Dickerson at Jefferies asked about costs and HIBOR assumption.

A: Georges Elhedery and Manveen Kaur answered on cost discipline, investment in growth, and HIBOR rate assumptions.

Q: Benjamin Toms at RBC asked about RoTE guidance sustainability and Hang Seng synergies.

A: Georges Elhedery and Manveen Kaur spoke on RoTE guidance and Hang Seng synergy details.

Q: Melissa Kuang from Goldman Sachs asked about revenue growth CAGR and Hang Seng restructuring costs.

A: Georges Elhedery and Manveen Kaur answered on revenue growth components and Hang Seng restructuring costs.

Q: Aman Rakkar at Barclays asked about capital allocation and banking NII.

A: Georges Elhedery and Manveen Kaur replied on capital allocation thought process and banking NII details.

Q: Amit Goel at Mediobanca asked about upgraded RoTE targets and Hang Seng Bank benefit.

A: Georges Elhedery and Manveen Kaur addressed LTIP and Hang Seng Bank benefit details.

Q: Kian Abouhossein at JPMorgan asked about macro assumption behind guidance and CRE.

A: Georges Elhedery and Manveen Kaur spoke on macro assumptions and Hong Kong CRE.

Q: Robert Noble at Deutsche Numis asked about noninterest income negatives and Hang Seng capital.

A: Georges Elhedery and Manveen Kaur answered on noninterest income and Hang Seng capital.

Q: Alastair Warr at Autonomous asked about Hang Seng asset quality and Wealth new account opening.

A: Georges Elhedery and Manveen Kaur responded on Hang Seng asset quality and Wealth new account opening.

Q: Jiahui Yan at CICC asked about macro assumption behind 3 years guidance.

A: Georges Elhedery and Manveen Kaur spoke on macro assumptions.

Q: Katherine Lei at CICC asked about deposit growth sustainability and Wealth impact.

A: Georges Elhedery and Manveen Kaur answered on deposit growth drivers and Wealth impact.