HSBC shares dip after profit beats expectations
HSBC surpassed analyst profit expectations in its annual results as its new boss reiterated its focus on slashing costs.
The FTSE 100 lender published its first set of results with Georges Elhedery at the helm this morning, covering the fourth quarter and full-year 2024.
Shares in the banking giant rose one per cent following market open, before quickly tumbling into the red. The stocks’ price fell to 889.7p early Wednesday morning.
For the fourth quarter, it recorded a $2.3bn (£1.8bn) profit before tax and the bank reported a pre-tax profit of $32.3bn (£25.6bn) in 2024, up from $30.3bn (£24bn) in 2023.
Operating expenses rose $1bn (£800m), the lender citing higher technology investment and the impact of inflation as the reason behind the growth.
Since assuming his role in September 2024, Elhedery has announced a cost overhaul, which included splitting the bank into four new divisions.
HSBC reported a decline of $3.1bn (£2.5bn) in net interest income, which the bank said reflected the impact of business disposals and higher funding costs from moving commercial surplus to the trading book.
It also announced a $2bn (£1.6bn) share buy-back following on from $9bn (£7bn) which began in 2024.
Total shareholder return for the year was over 30 per cent, which followed the bank repurchasing 11 per cent of the issued share count since 2023.
Similarly, the bank’s net interest margin reduced by 10 basis points to 1.56 per cent.
The lender said it expects net interest income to be around $42bn (£33bn) in 2025, taking into account “a number of market-dependent factors.”
Shore Capital’s Gary Greenwood said: “The final dividend was slightly better than expected while a further $2bn buyback was in line.”
“Overall, there is probably more for the market to like than not here, but the shares are now trading close to a 20 year high and look increasingly up with events,” he commented.
Richard Hunter, Head of Markets at interactive investor, said: “These are not results to shoot the lights out, but the areas in which HSBC is showing particular strength are those which will receive special attention following the group’s new refocus.
“Changing horses midstream is never an easy task, and the previously announced transformation will have upfront costs which will delay the benefits of the anticipated savings.
“On the other hand, the rationale for a more focused operation is clear and should allow the group to reap the rewards of a higher focus on profit generation, while also keeping costs in check.”
He added: “Overall, these are comforting numbers which leave HSBC a strong springboard on which to build as the business is reorganised.”
Bank remains focused on cost-cutting
Elhedery’s cost-cutting initiative will continue, as the bank said it retains a group-wide focus on cost discipline.
The bank said it estimates $0.3bn (£238m) of cost reductions in 2025, with a commitment to an annualised decrease of $1.5bn (£1.2bn) in its cost base expected by the end of 2026.
Commenting on the results, Elhedery said: “Since becoming CEO, I have focused on simplifying how we operate and injected energy and intent into the way we deliver our strategy.”
He added: “I have put in place a smaller, core team of exceptionally talented leaders driven by a growth orientated mindset and a firm focus on dynamically managing our costs and capital.
“We are embedding this approach across the organisation to ensure we are continually focused on these two important principles.
“Each targeted action we are taking is designed to unlock HSBC’s full potential.
“We look to the future with confidence and clarity of purpose.”