HSBC (HSBA) Q2 2024 earnings summary

Executive summary

• Profit before tax for 1H24 was $21.6bn, stable year-over-year, including a $4.8bn gain from the Canada sale and a $1.2bn impairment on the planned Argentina sale.

• Reported revenue rose 1% to $37.3bn, with strong performances in Wealth and Global Banking and Markets, offset by lower net interest income and business disposals.

• Return on tangible equity (ROTE) was 21.4% reported and 17.0% excluding notable items for 1H24, with a new mid-teens ROTE target for 2024 and 2025.

• Announced $13.7bn in distributions for 1H24, including dividends and a new $3bn share buyback, with total capital distributed in the last 18 months reaching $34.4bn.

• Announced leadership transition, with George Elhedery set to become Group CEO in September.

Financial highlights

• Net interest income fell 7% to $16.9bn, mainly due to business disposals and deposit migration; net interest margin decreased by 8bps to 1.62%.

• ECL charges were $1.1bn, down $0.3bn, reflecting releases in GBM and lower charges in UK and China CRE; ECL charge for 1H24 was 15bps of average gross customer loans.

• Operating expenses increased 5% to $16.3bn, mainly due to higher technology spend, inflation, and performance-related pay accruals.

• CET1 capital ratio at 15.0%, up from 14.8% at end-2023, reflecting strong capital generation and distributions.

• Basic EPS for 1H24 was $0.89; dividend per share for the period was $0.20, excluding special dividend.

Outlook and guidance

• Upgraded 2024 banking NII guidance to around $43bn, including $1bn from Argentina, subject to global interest rate trends.

• Targeting mid-teens ROTE (excluding notable items) for 2024 and 2025.

• 2024 ECL guidance revised to 30–40bps of average loans.

• 2024 cost growth guidance reconfirmed at around 5% on a target basis.

• CET1 ratio to be managed within 14–14.5% medium-term target range; dividend payout ratio targeted at 50% for 2024.