HSBC Holdings plc (NYSE:HSBC) Q1 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
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.
Key Financial Performance
Earnings Per Share (EPS) $1.95, up from expectations of $1.6.
Profit Before Tax Up 11% year-over-year, driven by strong business momentum.
Return on Tangible Equity 18.4%, annualized, excluding notable items.
Revenue $17.7 billion, 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.
Banking Net Interest Income (NII) Expected around $42 billion in 2025, remained broadly stable quarter-over-quarter, with impacts from interest rate cuts offset by repricing of liabilities and favorable changes in asset mix.
Wholesale Transaction Banking Income Up 13% year-over-year, driven by strong FX performance due to elevated volatility.
Credit Loss Charge (ECL) $0.9 billion, equivalent to an annualized charge of 37 basis points, including a $150 million provision for heightened economic uncertainty.
Deposits Up 6% year-over-year, with growth in all entities and businesses.
CET1 Ratio 14.7%, impacted by a $1.3 billion pretax loss from the reclassification of the retained French home loan portfolio.
Share Buyback Up to $3 billion announced, reflecting continued focus on capital return to investors.
Interim Dividend $0.10 per share, reflecting strong performance and capital return strategy.
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Operating Highlights
New Wealth Products: Investment in wealth products, distribution channels, and customer journeys is translating into results with a record 301,000 new-to-bank customers in Hong Kong and $22 billion of net new invested assets.
Market Expansion in Asia: Strong momentum in wealth with 300,000 new-to-bank customers in Hong Kong and $22 billion of net new invested assets, primarily in Asia.
Cost Management: On target to achieve around 3% cost growth in 2025 compared to 2024, with $0.3 billion of simplification savings expected in 2025.
Share Buyback and Dividend: Announced up to $3 billion share buyback and a $0.10 per share interim dividend, reflecting focus on capital return to investors.
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Risk or Challenges
Macroeconomic Environment: The external macroeconomic environment is less favorable and more uncertain, with trade policy uncertainty dampening business confidence and constraining investment.
Impact of Tariffs: Higher tariffs could lead to a low single-digit percentage impact on the group’s revenues and an incremental ECL charge of $0.5 billion due to a slowdown in global trade and GDP growth.
Credit Risk: The first quarter ECL charge included a $150 million provision reflecting heightened economic uncertainty, with potential sensitivity to macroeconomic performance.
Cost Management: The company is targeting around 3% cost growth in 2025 compared to 2024, while also aiming to deliver $0.3 billion of simplification savings.
Capital Impact from Reclassification: The reclassification of the retained French home loan portfolio led to a $1.3 billion pretax loss, impacting CET1 by around 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 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 and equities.
Return on Tangible Equity: Reaffirming a mid-teens return on tangible equity for 2025, 2026, and 2027.
Banking NII: Expecting banking NII of around $42 billion in 2025.
ECL Charge: Estimated incremental ECLs of $0.5 billion in a downside scenario due to increased tariffs.
CET1 Ratio: CET1 ratio was 14.7%.
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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 there other geographies that you’re also strategically reviewing the full-year results?
A:We are on track to deliver $1.5 billion of cost saves from organizational simplification and strategic reallocation of costs. We continue to progress at pace on those.
Q:Have you seen any potential to achieve cost saves in excess of that target?
A:We remain focused on delivering those commitments and will take any additional cost efficiencies as a matter of business as usual.
Q:Can you provide some color on how sustainable the strength in fees and other income is?
A:We expect to see continued strength in the wealth business and underlying growth, but there may be a slowdown in trade flows due to plausible downside scenarios.
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 foresee as a result of what’s happening?
A:We expect to deepen 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 the assumptions for the trade test better or worse than those used in the ECL test?
A:We’re not going to get into the detail, but the underpinning of the scenarios has the same starting point.
Q:Is the low-single digit revenue impact just for one year or for every year’s revenue thereafter?
A:We are not providing further details on that.
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 no significant drawdowns.
Q:Is the pace of distributions that you’re executing on committed despite the uncertainty?
A:Yes, we have a policy on ordinary dividends and share buybacks continues to be our preferred method to return capital.
Q:Are you minded to delay any of the redeploy given the volatile backdrop?
A:We have not made any change to the timeline of what we said we would do.
Q:What is the motivation behind the letter suggesting to the U.K. regulators that ring fencing should go?
A:Ring-fencing has increased costs and created capital inefficiencies, and we believe removing it will improve outcomes for customers.
Q:Could you talk about the moving parts regarding cost guidance?
A:Our full year 2025 guidance of plus 3% is based on inflation, investment spend, and the benefit from simplification.
Q:What is the guidance around interest rates and GDP assumptions?
A:The rates included are based on mid-April curves, and we expect to see continued growth in fee income.
Q:Have you incorporated any positive impact from stimulus policies in your downside scenario analysis?
A:In a plausible adverse downside scenario, we have not taken into account potential positive impacts from stimulus policies.
Q:How are major clients reacting to tariff policy?
A:Customers are in a wait-and-see mode, looking to create resilience in their business models.
Q:Review of Unclear Management Responses
A:Management avoided giving a direct answer to questions regarding the specifics of the trade test assumptions compared to ECL tests, the exact nature of the low-single digit revenue impact, and the potential for additional cost actions in response to the plausible downside scenario.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Banking FX
CEO today
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Georges Elhedery
London Pam
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Transcript HSBC
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approach investment
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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%.
HSBC Holdings Plc (HSBC) Presents At Barclays 23rd Annual Global Financial Services Conference Transcript
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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