HSBC Holdings plc: Q3 2024 Financial Summary
Business Context and Reporting Period
This Form 6-K filing reports HSBC Holdings plc's unaudited financial results for the three-month and nine-month periods ended September 30, 2024. The Group continues to execute its strategy of reshaping the portfolio, focusing on leadership in scale markets and international connectivity. Key strategic developments in the period included the completion of the sale of the banking business in Canada and the retail banking operations in France, alongside the announcement of a planned sale of the business in Argentina.
Key Financial Metrics
| Metric | 3Q 2024 | 9M 2024 | 3Q 2023 (YoY) |
|---|---|---|---|
| Revenue | $17.0 billion | $54.3 billion | $16.2 billion |
| Profit Before Tax | $8.5 billion | $30.0 billion | $7.7 billion |
| Profit After Tax | $6.7 billion | $24.4 billion | $6.3 billion |
| Net Interest Margin (NIM) | 1.46% | 1.57% | 1.70% |
| Expected Credit Losses (ECL) | $1.0 billion | $2.1 billion | $1.1 billion |
| Operating Expenses | $8.1 billion | $24.4 billion | $8.0 billion |
| CET1 Capital Ratio | 15.2% | 15.2% | 14.8% (Dec 2023) |
| Liquidity Coverage Ratio | 137% | 137% | 136% (Dec 2023) |
Material Changes vs. Prior Period
- Profit Growth: Profit before tax increased by $0.8 billion (10%) in 3Q24 compared to 3Q23, driven by revenue growth in Wealth and Personal Banking (WPB) and Global Banking and Markets (GBM). On a constant currency basis excluding notable items, profit before tax rose by $0.8 billion to $8.7 billion.
- Revenue Drivers: Revenue grew 5% year-over-year to $17.0 billion. Growth was supported by higher customer activity in Wealth products and volatile market conditions boosting Foreign Exchange and Equities revenue. This offset a $1.6 billion decline in Net Interest Income (NII) due to business disposals and higher funding costs.
- Notable Items: 3Q24 results included a $0.3 billion loss on the early redemption of legacy securities. 9M24 included a $4.8 billion gain on the disposal of the Canadian banking business, partially offset by a $1.2 billion impairment on the Argentina business classified as held for sale.
- Costs: Operating expenses rose 2% year-over-year, primarily due to technology investment and inflation, mitigated by cost discipline and the impact of disposals.
- Balance Sheet: Customer lending balances increased by $30 billion compared to 2Q24. Customer accounts grew by $67 billion, largely driven by inflows in Hong Kong and the UK.
Guidance, Outlook, and Risks
- Guidance: Management maintains its guidance for a mid-teens Return on Average Tangible Equity (RoTE) for 2024 and 2025 (excluding notable items). Banking NII guidance for 2024 remains at approximately $43 billion. Cost growth is targeted at approximately 5% for 2024 on a target basis.
- Capital Distribution: The Board approved a third interim dividend of $0.10 per share. A $3 billion share buy-back was completed in October 2024, and a new buy-back of up to $3 billion was announced, expected to complete before the full-year results.
- Strategic Reshaping: The Group announced a simplification of its organizational structure effective January 1, 2025, operating through four businesses: Hong Kong, UK, Corporate and Institutional Banking, and International Wealth and Premier Banking.
- Risks: Key risks include geopolitical tensions (Russia-Ukraine, Middle East conflicts), volatility in interest rates and foreign exchange, and ongoing challenges in the mainland China commercial real estate sector. The Group continues to monitor the impact of recent Chinese government stimulus measures.
Investor Verification Checklist
- Notable Items Impact: Verify the sustainability of profit growth by analyzing results excluding the $4.8 billion Canada disposal gain and the $1.2 billion Argentina impairment.
- China Real Estate Exposure: Review the specific exposure to mainland China commercial real estate ($8.9 billion total exposure) and the adequacy of the $2.1 billion allowance for ECL against this portfolio.
- Net Interest Margin Pressure: Assess the trajectory of NIM compression (down 24 bps YoY) against the backdrop of potential interest rate cuts and deposit migration.
- Argentina Disposal: Monitor the completion of the Argentina sale in 4Q24 and the potential recycling of foreign currency translation reserves to the income statement.
- Cost Efficiency: Track the achievement of the 5% target basis cost growth guidance amidst continued technology investment and inflationary pressures.