Europe’s largest lender, HSBC, reported second-quarter profit that missed expectations, largely due to impairment charges related to a Chinese bank and lost income from businesses sold in the first half of 2024. The bank posted a profit before tax of $6.3 billion for the quarter ended June, down 29% from the prior year, falling short of the $6.99 billion consensus estimate. Revenue reached $16.5 billion, slightly below expectations.
Operating expenses increased by 10% compared to the same period last year, driven mainly by restructuring costs, investments in technology, and increased spending. Following the results, HSBC’s shares in Hong Kong declined by 2.71%.
HSBC Group CEO Georges Elhedery highlighted ongoing “structural challenges” in the global economy, including broad-based tariffs and fiscal vulnerabilities, which have heightened uncertainty and market volatility. He emphasized that these factors are complicating inflation and interest rate outlooks and reshaping the economic environment even before tariffs fully take effect.
Despite these challenges, HSBC stated it remains “well-positioned” to manage the uncertainty, although it cautioned that its return on tangible equity (RoTE)—a key profitability measure—might be negatively impacted. The bank noted that while the direct revenue impact from tariffs is expected to be modest, worsening macroeconomic conditions could push RoTE below its targeted mid-teens range in the coming years.
HSBC anticipates muted lending demand for the remainder of the year but expects continued double-digit average annual growth in its wealth management division. The bank is focusing on scaling back its investment banking operations outside Asia and the Middle East, including planned job cuts in its Germany equities team.
This strategy aligns with Elhedery’s ongoing efforts to revamp HSBC’s investment bank, announced in October last year. The restructuring splits operations into four divisions, including distinct Eastern and Western market sectors, aiming to reduce costs by approximately $300 million in 2025. Earlier, HSBC decided to shutter its mergers and acquisitions business and parts of its equities operations in Europe and the Americas.
Industry analysts note HSBC’s challenge is to keep Asian shareholders supportive of Elhedery’s simplification and cost-cutting strategy without fundamentally changing the overall business model. Additionally, the bank faces the imminent task of replacing Group Chairman Mark Tucker, who is set to step down in September.
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