Hong Kong (Reuters) – HSBC has announced a robust set of financial results for 2024, reporting a pre-tax profit of $32.3 billion, surpassing both last year’s figures and market expectations. The strong performance was driven by solid revenue growth in the bank’s wealth and markets businesses, demonstrating resilience despite global economic uncertainties. At the same time, HSBC’s new Chief Executive Officer, Georges Elhedery, has unveiled an aggressive cost-cutting strategy aimed at saving $1.8 billion over the next two years, signaling a new era of strategic transformation for the London-headquartered bank.
Elhedery, who stepped into the role in September last year, has made clear his vision to optimize HSBC’s operational efficiency while strengthening its position in Asia, the region that generates the majority of its revenue. His leadership comes at a time when global central bank policies are diverging, with the European Central Bank potentially easing rates, the Federal Reserve holding steady, and the Bank of Japan preparing for a long-awaited rate hike. Against this backdrop, HSBC is adapting its strategy to ensure sustained profitability and capital efficiency amid fluctuating economic conditions.
The bank’s latest financial report indicates that it has successfully navigated these challenges, as its pre-tax profit grew from $30.3 billion in 2023 to $32.3 billion in 2024, exceeding the analyst consensus of $31.7 billion. This growth was achieved despite declining interest rates, showcasing the strength of HSBC’s core business segments. Wealth and personal banking, its most profitable division, recorded a pre-tax profit of $12.2 billion, reflecting a 5.2% increase year-over-year, driven by strong customer acquisitions and heightened demand for wealth management products. Additionally, HSBC’s global banking and markets division posted an impressive 27% jump in profit, reaching $7.1 billion, further reinforcing the bank’s diversified revenue streams.
As part of his cost-reduction strategy, Elhedery has set ambitious efficiency targets, with HSBC aiming to cut $300 million in expenses in 2025 and reach a total cost reduction of $1.5 billion annually by the end of 2026. A key element of this initiative includes an 8% reduction in personnel expenses, a move that aligns with HSBC’s broader strategy of streamlining operations and reallocating resources to high-growth areas. In a statement accompanying the earnings report, Elhedery emphasized the importance of this restructuring, stating, “We have renewed vigor in finding efficiencies that will optimize our resource allocation, be that geographical, business line, or balance sheet. This will enhance the way we actively and dynamically manage costs and capital, and target investments.”
Investor sentiment surrounding HSBC’s earnings release was largely positive, with the bank’s Hong Kong-listed shares rising by more than 1% following the announcement, even as the broader market index dipped by 0.1%. Analysts have noted that while the cost-cutting measures are not revolutionary, they represent a necessary step in improving the bank’s long-term efficiency. Michael Makdad, Senior Equity Analyst at Morningstar, commented, “Plans to trim personnel expenses by 8% over 2025 and 2026 are positive, but I don’t see a lot of drastic restructuring or headline-grabbing cost-cutting measures. That’s not necessarily a bad thing—at a bank like HSBC, efficiency gains are achieved through a series of well-coordinated, incremental improvements.”
Alongside its cost-cutting program, HSBC announced a $2 billion share buyback, which it expects to complete before its next earnings report. The bank also reaffirmed its commitment to delivering a mid-teens return on average tangible equity (ROTE) between 2025 and 2027, though it acknowledged that ongoing interest rate volatility remains a significant variable in its financial outlook.
To reward shareholders, HSBC declared a fourth interim dividend of $0.36 per share, bringing the total annual dividend to $0.87 per share, which includes a special payout of $0.21 per share following the disposal of its Canadian operations. The sale of its Canadian business is part of HSBC’s broader strategic realignment, which aims to sharpen its focus on core markets and improve capital efficiency.
Elhedery has also moved swiftly to restructure HSBC’s corporate divisions, introducing an East-West operating model and cutting investment banking teams in Europe and the Americas. These moves underscore the bank’s ongoing pivot towards Asia, reinforcing its ambition to solidify its presence in high-growth markets while scaling back in less profitable regions.
As HSBC continues its transformation under Elhedery’s leadership, the coming years will be crucial in determining the success of the bank’s efficiency drive and its ability to sustain profitability in an evolving global financial landscape.
