HSBC Holdings plc: 2024 Interim Results Summary
Business Context and Reporting Period
This Form 6-K reports the unaudited interim results for HSBC Holdings plc for the six-month period ended 30 June 2024. The filing covers the first half of the fiscal year, highlighting the execution of the bank's strategy to diversify revenue and reduce sensitivity to interest rates. The period included the completion of the disposal of the banking business in Canada and the retail banking operations in France.
Key Financial Metrics
| Metric | 1H 2024 | 1H 2023 | Change |
|---|---|---|---|
| Revenue | $37.3 billion | $36.9 billion | +1% (Reported) |
| Profit Before Tax | $21.6 billion | $21.7 billion | Stable |
| Profit After Tax | $17.7 billion | $18.1 billion | -2% |
| Net Interest Margin (NIM) | 1.62% | 1.70% | -8 bps |
| Cost Efficiency Ratio | 43.7% | 41.9% | +1.8 pts |
| Expected Credit Losses (ECL) | $1.1 billion | $1.3 billion | -$0.3 billion |
| CET1 Capital Ratio | 15.0% | 14.8% (4Q23) | +0.2 pts |
| Liquidity Coverage Ratio (LCR) | 137% | 136% | +1 pt |
Material Changes vs. Prior Period
- Notable Items Impact: Reported results included a $4.8 billion gain on the disposal of the Canadian banking business, partially offset by a $1.2 billion impairment related to the planned sale of the Argentina business. The prior year (1H23) included a $2.1 billion reversal of an impairment regarding the France sale and a $1.5 billion gain on the acquisition of Silicon Valley Bank UK.
- Underlying Performance: Constant currency profit before tax excluding notable items was stable at $18.1 billion. Revenue excluding notable items rose 2% to $33.7 billion, driven by growth in Wealth, Equities, and Global Payment Solutions.
- Expense Growth: Operating expenses increased 5% to $16.3 billion, primarily due to higher technology investment, inflation, and performance-related pay accruals. Target basis operating expenses rose 7%.
- Balance Sheet: Customer lending balances were stable at $938 billion (reported), while customer accounts fell slightly to $1.6 trillion.
Guidance, Outlook, and Management Commentary
- New RoTE Guidance: Management now targets a Return on Average Tangible Equity (RoTE) in the mid-teens for both 2024 and 2025, excluding notable items.
- Net Interest Income: Banking Net Interest Income (NII) guidance for 2024 has been upgraded to around $43 billion, up from a previous "at least $41 billion," reflecting the current interest rate environment.
- Cost and Credit Outlook: Cost growth guidance remains at approximately 5% for 2024. ECL charges are expected to return to the medium-term planning range of 30-40 basis points of average gross loans.
- Capital Return: The Board approved a second interim dividend of $0.10 per share and announced a new share buy-back program of up to $3 billion, expected to complete within three months.
- Strategic Focus: CEO Noel Quinn emphasized the success of the strategy in diversifying revenue through Wealth and transaction banking, reducing reliance on interest rates. He noted confidence in the model's ability to grow revenue even in a lower interest rate environment.
Investor Verification Checklist
- Notable Items Reconciliation: Verify the specific impact of the $4.8 billion Canada disposal gain and $1.2 billion Argentina impairment on the reported profit to understand underlying operational performance.
- Interest Rate Sensitivity: Assess the bank's exposure to falling interest rates given the upgraded NII guidance and the stated target of mid-teens RoTE in a potentially lower rate environment.
- Cost Discipline: Monitor the trajectory of operating expenses, which rose 7% on a target basis, against the 5% full-year guidance to ensure cost control measures are effective.
- China Real Estate Exposure: Review the specific details of the reduction in ECL charges related to the commercial real estate sector in mainland China to gauge credit quality trends.
- Capital Deployment: Confirm the execution timeline and pricing of the announced $3 billion share buy-back program.