HSBC Holdings plc: 2024 Interim Results Summary (Form 6-K)
Business Context and Reporting Period
This report covers the interim results for the six-month period ended June 30, 2024. HSBC Holdings plc, a leading international bank, reported stable financial performance driven by its strategy of revenue diversification and cost discipline. The period included significant strategic transactions, including the completion of the sale of its banking business in Canada and retail banking operations in France, as well as the acquisition of Citi's retail wealth management portfolio in mainland China.
Key Financial Metrics
| Metric | 1H 2024 | 1H 2023 | Variance |
|---|---|---|---|
| Revenue (Reported) | $37.3 billion | $36.9 billion | +1% |
| Profit Before Tax (Reported) | $21.6 billion | $21.7 billion | Stable |
| Profit After Tax | $17.7 billion | $18.1 billion | -2% |
| Constant Currency Profit Before Tax (Excl. Notable Items) | $18.1 billion | $18.4 billion | Stable |
| Operating Expenses (Reported) | $16.3 billion | $15.5 billion | +5% |
| Net Interest Margin (NIM) | 1.62% | 1.70% | -8 bps |
| Expected Credit Losses (ECL) | $1.1 billion | $1.4 billion | -21% |
| Common Equity Tier 1 (CET1) Ratio | 15.0% | 14.7% | +0.3 pp |
| Return on Average Tangible Equity (RoTE) | 21.4% | 22.4% | -1.0 pp |
| RoTE Excluding Notable Items | 17.0% | 18.5% | -1.5 pp |
Material Changes vs. Prior Period
- Strategic Transactions: The period included a $4.8 billion gain on the sale of the banking business in Canada and a $1.2 billion impairment related to the classification of the Argentina business as held for sale. These were offset by the non-recurrence of a $2.1 billion impairment reversal in France and a $1.5 billion gain on the SVB UK acquisition from the prior year.
- Revenue Drivers: Revenue growth was driven by higher customer activity in Wealth products and Equities/Securities Financing. Net Interest Income (NII) fell by $1.4 billion due to business disposals and deposit migration, though Banking NII rose 1%.
- Costs: Operating expenses rose 5% primarily due to higher technology spend, inflationary pressures, and performance-related pay accruals. Target basis operating expenses rose 7%.
- Balance Sheet: Customer lending balances were stable on a reported basis ($938 billion) but increased by $12 billion on a constant currency basis. Customer accounts fell $18 billion reported, but increased $3 billion on a constant currency basis.
Guidance, Outlook, and Risks
- RoTE Guidance: HSBC now targets a Return on Average Tangible Equity (excluding notable items) in the mid-teens for both 2024 and 2025.
- Banking NII: Guidance for 2024 Banking NII has been upgraded to around $43 billion, dependent on the path of global interest rates.
- Costs and ECL: Cost growth guidance for 2024 remains at approximately 5% (target basis). ECL charges are expected to be within the medium-term planning range of 30bps to 40bps 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 of up to $3 billion.
- Risks: Key risks include geopolitical tensions (Russia-Ukraine, Israel-Hamas), potential escalation in the Middle East, US-China strategic competition, and volatility in interest rates and foreign exchange. The commercial real estate sector in mainland China remains subdued.
Key Facts for Investor Verification
- Verify the impact of the $4.8 billion Canada sale gain and the $1.2 billion Argentina impairment on the reported profit stability.
- Monitor the mid-teens RoTE guidance against the backdrop of potential interest rate cuts and their impact on Net Interest Income.
- Review the commercial real estate exposure in mainland China and Hong Kong, noting the subdued market conditions and credit migration risks.
- Confirm the execution of the $3 billion share buy-back and the timing of the second interim dividend payment.
- Assess the cost growth trajectory (target basis 5%) given the reported 7% increase in target basis operating expenses in 1H24.