HSBC (HSBA) Q4 2024 Fixed Income earnings summary

Executive summary

• Achieved record profit before tax of $32.3 billion for 2024, or $34.1 billion excluding notable items, with return on tangible equity (RoTE) at 14.6% (16% excluding notable items), aligning with mid-teens RoTE guidance.

• Distributed $26.9 billion to shareholders for 2024, including $11 billion in share buybacks and $0.87 DPS, while maintaining a CET1 ratio above the target range.

• Undertook significant organizational simplification, merging wholesale businesses, enhancing focus on wealth management, and targeting $1.5 billion in cost savings by YE26.

Financial highlights

• CET1 ratio at 14.9%, above the 14%-14.5% target range, with over 300 basis points headroom above MDA hurdle.

• Profits generated 340 basis points of CET1 in 2024, supporting dividends and buybacks.

• Banking net interest income (NII) stable through 2024, expected at ~$42 billion in 2025.

• ECL charge for 2024 was $3.4 billion (36bps cost of risk), including $0.4 billion for China CRE; stage 3 loans at 2.4% of gross loans.

• Costs rose 5% to $33.0 billion, mainly due to tech investment and inflation.

Outlook and guidance

• Confident in delivering mid-teens RoTE for 2025-2027, excluding notable items.

• Cost efficiency savings of $1.5 billion targeted over two years, with an additional $1.5 billion to be reallocated to growth areas.

• 2025 ECL charge expected within 30-40bps planning range.

• FY25 Banking NII expected around $42 billion, subject to market conditions.

• Cost growth targeted at ~3% for FY25 (target basis).