The bank posted pretax profit in the six months to June of $21.56 billion, down from $21.66 billion in the same period of last year.

HSBC’s earnings results

The first-half figure of pretax profit came in well above the $20.5 billion average of broker estimates compiled by HSBC, as per reports.

“We are growing and investing in our international retail and wealth business to sit alongside this, which is helping to diversify revenue,” HSBC’s outgoing CEO Noel Quinn said Wednesday.

“Each of these strengths contributed to a good revenue performance in the first half of 2024, supported by higher interest rates.”

The new return target and earnings that beat market expectations should give investors confidence, Jefferies analyst Joe Dickerson added.

HSBC’s revenue

HSBC’s revenue was up 1.1% year-on-year to $37.3 billion, in a performance HSBC attributed to the “impact of higher consumer activity in our Wealth products in Wealth and Personal Banking (‘WPB’), and in Equities and Securities Financing in Global Banking and Markets (‘GBM’).”

The lender’s wealth revenue picked up by 12% to $4.3 billion in the first six months to June, with noted growth in investment distribution, asset management and life insurance.

The bank outlined its priorities of diversifying its revenues and maintaining a firm foothold in what it described as its “critical” home markets of Hong Kong and the U.K. — it noted 345,000 new-to-bank customers opening accounts in the former region in the first half of the year, with international customers up 8% to 2.7 million in Britain over the same period.

HSBC approved dividend

The bank also approved a second interim dividend of $0.10 per share and announced a share buyback of up to $3 billion, which it said it expects to complete within three months.

“That takes our total distribution to shareholders in 18 months to over $34 billion,” HSBC’s Quinn told CNBC Wednesday. “And I think the standout performance is, I think, our ability to continue to grow revenue from alternative sources other than interest income.”

HSBC’s new goals

Europe’s biggest bank also set out a new goal for its return on average tangible equity – a key performance target – to be in the mid-teens in 2025, matching its estimate for 2024.

As HSBC is due to welcome new CEO Georges Elhedery in September following the retirement of Noel Quinn, said it had succeeded in reducing its sensitivity to rate cuts through an insurance strategy known as a structural hedge.

HSBC return on equity

HSBC’s CET1 capital ratio picked up to 15.0%, up by 0.2 percentage points compared with the Q4 of last year and above the lender’s guidance of its medium-term target range of 14% to 14.5% for the metric.

The bank also declared a return on average tangible equity excluding notable items of 17.0% over January-June, down from 18.5% in the same period of last year. HSBC provided new guidance of “mid-teens return on average tangible equity in 2025,” in line with its 2024 outlook.

“The strong performance of the business gives us the confidence to say that we’ll be mid-teens return in 2025 as well,” said Quinn. Addressing the broader outlook, he touched on the bank’s performance in the U.K., saying, “I think there are some encouraging signs in there for future economic growth, and there’s certainly a strong resilient economy at the moment.”

Stock update

HSBC share price which is London-listed picked up 3.12% at 08:42 a.m. London time, just after local markets opened, while Hong Kong-listed HSBC share price were up roughly 4.4%. This is as investors cheered its stable first-half profit growth, gains in wealth management income and narrowing losses in Chinese real estate.

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HSBC which makes most of its revenue in Asia, announced its profit before tax climbed 79% from a year ago to $5.8 billion for the first quarter that ended March 31. According to estimates compiled by HSBC, it beat analyst expectations of $3.346 billion.

The London-headquartered bank’s revenue fell 5 percent, slightly above expectations for $12.6 billion.

“The economic outlook has improved, although uncertainties remain,” said chief executive Noel Quinn. “We carry good momentum into the second quarter, while maintaining conservative positions on capital, funding, liquidity and credit.”

HSBC’s reserves for expected credit losses plunged from their peaks in 2020. It released $400 million of provisions that it made for bad debts racked up during the coronavirus pandemic.

The bank set aside $3 billion in the first quarter of 2020. The reversal on credit losses of $600 million helped turnaround the bank’s performance, which reported first-quarter profits of more than $1 billion, contrasted and $369 million in a similar period a year ago.

HSBC shares rose as much as 2.8 percent in Hong Kong trading on Tuesday following the arrival of the release of first-quarter results. HSBC is currently planning to redeploy $100 billion of risk-weighted assets from its underperforming assets in Europe and the US to Asia. It has additionally vowed to cut $5.5 billion from annual expenses and cut 35,000 positions as low interested rates cut billions of dollars a year from revenue.

HSBC said it was proceeding with negotiations on the sale of its French retail banking division to private equity group Cerberus, albeit no decision had at this point been taken. In recent times the bank has found itself in hot water due to the ongoing US–China trade war. Its first-quarter profit dipped significantly a year ago after the bank increased reserves for loans gone bad as the pandemic unfolded its economic devastation across the globe.

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