HSBC Holdings plc (HSBC) Q1 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call highlights a mix of strong financial performance, including an 11% rise in profit before tax and a $3 billion share buyback program. Revenue and deposits increased, with a stable CET1 ratio despite a reclassification loss. The Q&A indicates confidence in achieving cost savings and sustaining fee income growth, though some concerns about volatility and economic uncertainty remain. Overall, the positive financial metrics, shareholder returns, and optimistic management tone suggest a positive stock price movement.
Key Financial Performance
Profit Before Tax Profit before tax was up 11% year-over-year.
Return on Tangible Equity Annualized return on tangible equity was 18.4%, excluding notable items.
Revenue Revenue of $17.7 billion was up $1.1 billion year-over-year, driven by fee and other income, including a $0.3 billion increase in debt and equity markets due to higher volatility and a $0.2 billion favorable impact from the disposal of Argentina.
Banking NII Banking NII run rate remained broadly stable compared to the fourth quarter, with expectations of around $42 billion in 2025.
Wholesale Transaction Banking Wholesale transaction banking revenue was up 13% year-over-year, driven by strong FX performance.
ECL Charge First quarter ECL charge was $0.9 billion, equivalent to an annualized charge of 37 basis points, including a $150 million provision for heightened economic uncertainty.
Deposits Deposits were up 6% year-over-year, with growth in all entities and businesses.
CET1 Ratio CET1 ratio was 14.7%, impacted by a $1.3 billion pretax loss from the reclassification of the retained French home loan portfolio.
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Operating Highlights
New Wealth Products: Attracted net new invested assets of $22 billion and 301,000 new-to-bank customers in Hong Kong.
Market Expansion in Asia: Continued strong performance in wealth management, particularly in Hong Kong, contributing to double-digit growth.
Cost Management: On track to achieve around 3% cost growth in 2025 compared to 2024.
Simplification Savings: Expected to deliver $0.3 billion of simplification savings into the P&L in 2025.
Share Buyback and Dividend: Announced up to $3 billion share buyback and a $0.10 per share interim dividend.
Capital Allocation: Disciplined approach to investments and capital allocation to drive growth across four businesses.
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Risk or Challenges
Macroeconomic Environment: The external macroeconomic environment is less favorable and more uncertain than previously, with uncertainty around trade policy dampening business confidence and constraining investment.
Impact of Tariffs: Higher tariffs could lead to a notable slowdown in global trade and GDP growth, with a low single-digit percentage impact on the group's revenues in a plausible downside scenario.
Expected Credit Losses (ECL): In a consensus downside scenario, an increase in tariffs could result in incremental ECLs of $0.5 billion due to a global economic slowdown.
Economic Uncertainty: Heightened economic uncertainty has led to a $150 million provision in the first quarter ECL charge, reflecting the potential impact on credit performance.
Capital Impact from Losses: The reclassification of the retained French home loan portfolio resulted in a $1.3 billion pretax loss, impacting CET1 by approximately 0.2 percentage points.
Dilution Loss from Share Issuance: An expected dilution loss of between $1.2 billion and $1.6 billion on the stake in BoCom due to a share issuance, treated as a material notable item.
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Guidance & Outlook
Share Buyback: Announced an up to $3 billion share buyback reflecting continued focus on capital return to investors.
Interim Dividend: Declared a $0.10 per share interim dividend.
Cost Management: On track to achieve around 3% cost growth in 2025 compared to 2024.
Simplification Savings: Targeting $0.3 billion of simplification savings in 2025.
Wealth Growth: Achieved fifth consecutive quarter of double-digit growth in wealth, attracting $22 billion in net new invested assets.
Transaction Banking Performance: Strong performance in Transaction Banking, particularly in FX, driven by higher client activity.
Return on Tangible Equity: Reaffirming a mid-teens return on tangible equity for 2025, 2026, and 2027.
Banking NII Expectations: Expecting banking NII of around $42 billion in 2025.
ECL Charge: In a downside scenario, estimating an incremental ECL charge of $0.5 billion due to potential tariff impacts.
CET1 Ratio: CET1 ratio was 14.7%, with an expected impact of the buyback on the second quarter.
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Shareholder Return Plan
Interim Dividend: $0.10 per share
Share Buyback Program: Up to $3 billion share buyback program announced.
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Key Q&A
Q:Are the other geographies that you're also strategically reviewing the full-year results? Have you seen any potential to be able to achieve cost saves in excess of that target?
A:We are on track to deliver the $1.5 billion of cost saves from organizational simplification and strategic reallocation of costs. We continue to progress at pace on those and remain focused on delivering those commitments.
Q:Can you provide some color on how sustainable the strength in fees and other income is and how much is driven by the augmented volatility?
A:We expect to see continued strength in the wealth business and double-digit growth in the medium term. However, volatility may not repeat at the same high levels seen in this quarter.
Q:What was the point of undertaking the plausible downside scenarios for the low-single digit impact on revenue?
A:The exercise was meant to evaluate the impact of plausible downside scenarios on our overall activities, including trade.
Q:Could you opine on any opportunities that you're seeing or foresee as a result of what's happening?
A:We expect to deepen our relationships with existing clients and attract more clients due to our strength and expertise.
Q:Can you make any comment on April trends in Hong Kong?
A:We acquired 300,000 new-to-bank customers in Q1 and continue to see that trend ongoing.
Q:Are there assumptions for the trade test better or worse than those set of assumptions used in the ECL test?
A:We are not going to get into the detail, but the underpinning of the scenarios has the same starting point.
Q:Could you please give us some color on the latest trend on Hong Kong CRE?
A:This was a relatively quiet quarter with no significant impact on ECLs.
Q:Have you observed any material shift in the way that your customers are transacting with you?
A:Corporate customers are in a wait-and-see mode, with some CapEx on hold, but deposit behavior has remained normal.
Q:Should we be confident around things like the buyback sustainability from here?
A:If we have excess capital, share buybacks continue to be our preferred method to return capital.
Q:Are you minded to delay any of this redeploy given the volatile backdrop?
A:We have not made any change to the timeline of what we said we would do.
Q:Can you clarify the motivation behind the ring-fencing letter to U.K. regulators?
A:We believe that removing ring-fencing will improve the outcome for customers and support growth in the U.K.
Q:Is there anything we should be thinking about in the upcoming quarters as far as cost inflation is concerned?
A:We managed cost to a full year number, and quarter-on-quarter, you can see some volatility.
Q:What date or week should we use as guidance in terms of interest rate assumption?
A:The rates included are based on the mid-April curves.
Q:Have you incorporated some of the positive impact from the stimulus policies in your downside scenario analysis?
A:In a plausible adverse downside scenario, we have not taken into account potential positive impacts.
Q:How are major clients reacting to tariff policy in April?
A:Customers are in a wait-and-see mode, looking at their business models and supply chains.
Q:Review of Unclear Management Responses
A:Management avoided giving a direct answer regarding the specific assumptions for the trade test compared to the ECL test, stating they would not get into detail. Additionally, they did not provide clarity on the exact impact of the plausible downside scenario on their current operations, suggesting it is a lower probability than the expected scenario.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Aman Rakkar
Bank PLC
Banking FX
Barclays Bank
Benjamin Toms
Bruyette Woods
CEO digit
Capital Markets
ET Welcome
Edward Firth
Executive Officer
FX equity
Firth Keefe
GDP increase
GDP tariff
Georges Elhedery
Kaur Group
Keefe Bruyette
Kunpeng China
London Pam
Markets Kunpeng
Momentum confidence
Officer Benjamin
Officer Pam
ability target
increase tariff
quality
slowdown trade
tariff scenario
time
trade policy
HSBC Transcript
HSBC Holdings plc (HSBC) Q3 2025 Earnings Call Transcript
Positive10-28
The earnings call summary and Q&A indicate strong financial performance, strategic investments, and shareholder returns. The $0.10 dividend and $3 billion share buyback are positive catalysts. Despite some uncertainties like ECL guidance revision and challenging office sector in Hong Kong, the optimistic outlook for Wealth management and strategic investments in AI and technology bolster the sentiment. The Madoff litigation provision is a concern but doesn't alter buyback plans. Overall, positive elements outweigh negatives, suggesting a potential stock price increase of 2% to 8%.
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Neutral9-9
HSBC Holdings plc (HSBC) H1 2025 Earnings Call Transcript
Neutral7-30
HSBC Holdings plc (NYSE:HSBC) Q1 2025 Earnings Call Transcript
Positive4-30
The earnings call summary indicates positive financial performance with a revenue increase, stable net interest income, and a significant share buyback announcement. The Q&A revealed management's confidence in cost savings and continued capital returns, despite some uncertainties. The strong CET1 ratio and dividend reflect financial health. Although there are concerns about trade flow slowdowns, the overall sentiment is optimistic, supported by client growth and strategic cost management. The lack of market cap information suggests a cautious approach, leading to a 'Positive' prediction for stock price movement.
HSBC Report
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