HSBC Holdings plc: 2024 Full Year Results Summary
Business Context and Reporting Period
This Form 6-K reports the full-year financial results for HSBC Holdings plc for the period ended December 31, 2024, announced on February 19, 2025. The reporting period coincides with the bank's 160th anniversary and the implementation of a new operating structure effective January 1, 2025, comprising four businesses: Hong Kong, the UK, Corporate and Institutional Banking, and International Wealth and Premier Banking. The results reflect the completion of strategic disposals in Canada, Argentina, France, Russia, and Armenia.
Key Financial Metrics
| Metric | 2024 | 2023 | Change |
|---|---|---|---|
| Profit Before Tax | $32.3 billion | $30.3 billion | +$2.0 billion |
| Profit After Tax | $25.0 billion | $24.6 billion | +$0.4 billion |
| Revenue | $65.9 billion | $66.1 billion | Stable |
| Constant Currency Revenue (excl. notable items) | $67.4 billion | $64.5 billion | +$2.9 billion |
| Operating Expenses | $33.0 billion | $32.1 billion | +$1.0 billion |
| Cost Efficiency Ratio | 50.2% | 48.5% | +1.7 ppts |
| Net Interest Margin (NIM) | 1.56% | 1.66% | -10 bps |
| Expected Credit Losses (ECL) | $3.4 billion | $3.4 billion | Stable |
| CET1 Capital Ratio | 14.9% | 14.8% | +0.1 ppts |
| Dividend Per Share (Total 2024) | $0.87 | $0.61 | +$0.26 |
Material Changes vs. Prior Period
- Profitability: Reported profit before tax rose by $2.0 billion, driven by a $1.0 billion net favorable impact from notable items. This included a $4.8 billion gain on the disposal of the Canadian banking business, offset by a $1.0 billion loss on the disposal of the Argentine business and a $5.2 billion recycling of foreign currency reserve losses. Excluding notable items, constant currency profit before tax increased by $1.4 billion to $34.1 billion.
- Revenue: Reported revenue was stable at $65.9 billion. Growth in Wealth and Personal Banking (WPB) and Global Banking and Markets (GBM) was offset by the net adverse impact of strategic transactions and a $0.2 billion loss on the early redemption of legacy securities. Constant currency revenue excluding notable items rose by $2.9 billion.
- Net Interest Income (NII): NII decreased by $3.1 billion to $32.7 billion, primarily due to business disposals and higher funding costs associated with redeploying commercial surplus to the trading book. Banking NII fell by 1% to $43.7 billion.
- Costs: Operating expenses grew by 3% to $33.0 billion, driven by technology investment and inflation, partially offset by cost reductions from disposals in Canada and France. Target basis operating expenses rose by 5%.
- Balance Sheet: Customer lending balances fell by $8 billion on a reported basis but rose by $14 billion on a constant currency basis. Customer accounts rose by $43 billion reported ($75 billion constant currency), with growth primarily in Asia.
Guidance, Outlook, and Management Commentary
- Strategic Focus: Management emphasizes a simplified, agile structure with four differentiated businesses. The focus is on sustainable strategic growth, cost discipline, and dynamic capital management.
- 2025 Targets:
- Return on Tangible Equity (RoTE): Targeting mid-teens RoTE (excluding notable items) for 2025-2027.
- Banking NII: Expected to be around $42 billion in 2025.
- Costs: Targeting approximately 3% growth in target basis operating expenses for 2025. This includes $0.3 billion in simplification-related savings in 2025, with a commitment to an annualized reduction of $1.5 billion by the end of 2026.
- Capital: CET1 ratio target range of 14% to 14.5%. Dividend payout ratio target of 50% for 2025.
- Asset Growth: Expecting mid-single-digit percentage growth in customer lending balances and double-digit average annual growth in fee and other income in Wealth over the medium term.
- Shareholder Returns: The Board approved a fourth interim dividend of $0.36 per share (total 2024 dividend $0.87, including a $0.21 special dividend). A new share buy-back of up to $2 billion was announced, expected to complete by the Q1 2025 results announcement.
- Risks and Contingencies:
- Legal Proceedings: Ongoing litigation includes matters related to the Bernard L. Madoff Investment Securities LLC fraud, US Anti-Terrorism Act claims, Libor and foreign exchange investigations, and precious metals fixing litigation. Management states it is not practicable to predict the resolution or impact of these matters.
- Investment in BoCom: The Group holds a 19.03% interest in Bank of Communications (BoCom). No further impairment was recorded in 2024 following a $3.0 billion impairment in 2023. The carrying amount is $22.4 billion, while fair value is $11.6 billion. Management monitors Chinese policy developments regarding bank recapitalization.
- Macro Environment: Outlook remains uncertain due to geopolitical tensions, trade frictions, and volatile interest rates.
Key Facts for Investor Verification
- Notable Items Impact: Verify the composition of the $1.0 billion net favorable impact from notable items, specifically the $4.8 billion Canada disposal gain versus the $6.2 billion combined losses from Argentina disposal and reserve recycling.
- BoCom Valuation: Monitor the $10.8 billion gap between the carrying amount ($22.4 billion) and fair value ($11.6 billion) of the BoCom investment and any updates on Chinese bank recapitalization policies.
- Cost Savings Execution: Track the realization of the $0.3 billion in 2025 simplification savings and the $1.8 billion in up-front severance costs planned for 2025-2026.
- Legal Exposure: Review the status of the Herald Fund SPC litigation in Luxembourg, where the Court of Appeal reversed a dismissal in December 2024, and the ongoing Madoff-related trustee litigation.
- Capital Management: Confirm the execution of the $2 billion share buy-back and the maintenance of the CET1 ratio within the 14.0% - 14.5% target range amidst organic balance sheet growth.