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HSBC Holdings PLC (LSE:HSBA)has reported steady financial performance for the first half of 2024. The bank achieved a profit before tax of $21.6 billion, remaining stable compared to 1H23. However, profit after tax decreased slightly by $0.4 billion or 2%, totaling $17.7 billion. This decline was influenced by several factors, including notable gains and losses from strategic transactions.
Key Strategic Transactions
In 1H24, HSBC completed the sale of its banking business in Canada, realizing a gain of $4.8 billion. Conversely, the bank recorded an impairment of $1.2 billion following the classification of its Argentine business as held for sale. These results contrast with 1H23, which included a $2.1 billion reversal of impairment related to the sale of retail banking operations in France and a $1.5 billion gain from acquiring Silicon Valley Bank UK Limited (SVB UK).
Revenue and Income Analysis
Revenue for 1H24 rose by $0.4 billion or 1%, reaching $37.3 billion. Despite this growth, net interest income (NII) fell by $1.4 billion. The decline in NII was primarily due to reductions from business disposals, deposit migration, and redeployment into the trading book at HSBC Bank plc and the main entity in Hong Kong. Increased funding costs related to the trading book led to a 1% increase in banking NII.
Dividend and Share Buy-Back
The Board has approved a second interim dividend of $0.10 per share. Additionally, HSBC plans to initiate a share buy-back program of up to $3 billion, expected to be completed within the next three months. These actions are part of the bank's ongoing commitment to returning value to shareholders.
Second Quarter 2024 Performance
In Q2 2024, HSBC reported a profit before tax of $8.9 billion, a $0.1 billion increase from Q2 2023. This improvement was due to a lower expected credit loss (ECL) charge, which more than offset higher operating expenses and reduced revenue. On a constant currency basis, the profit before tax increased by $0.4 billion or 4%.
Revenue for Q2 2024 fell by $0.2 billion to $16.5 billion. This decrease was partly due to the absence of revenues from the recently sold businesses in France and Canada, which were included in Q2 2023. Additionally, Q2 2024 included a loss related to the recycling of reserves following the sale of the Russian business. This was partially countered by growth in Securities Financing and Equities in Global Banking and Markets (GBM) and in Wealth Management in the Wealth and Personal Banking (WPB) division.
Outlook and Guidance
HSBC targets a return on average tangible equity (RoTE), excluding notable items, in the mid-teens for both 2024 and 2025. The bank anticipates banking NII to reach around $43 billion in 2024, contingent on global interest rate movements. Although loan growth was 1% in 1H24, HSBC continues to expect mid-single-digit year-on-year growth in customer lending over the medium to long term.
