HSBC Holdings plc Q3 2024 Performance Overview

HSBC Holdings plc (NYSE: HSBC) reported a robust performance in the third quarter of 2024, showcasing an 11% year-on-year increase in profit before tax, amounting to $8.5 billion. During the earnings call, Group Chief Executive Georges Elhedery highlighted significant revenue growth, announced a new share buyback program, and outlined upcoming organizational changes.

Key Takeaways

• Profit before tax reached $8.5 billion, marking an 11% increase compared to the previous year.
• Revenue rose by $1.1 billion, with fee and other income increasing by $1.6 billion.
• A third interim dividend of $0.10 per share and a new $3 billion share buyback program were introduced.
• Starting January 1, 2025, HSBC will reorganize into four business lines and streamline its geographic governance.
• The CET1 ratio improved to 15.2%, with projected stable banking net interest income of approximately $43 billion for 2024.
• Wealth management in Asia experienced a significant 32% year-on-year increase, contributing to strong fee income.

Company Outlook

• HSBC is committed to a mid-teens return on tangible equity.
• Cost growth is expected to remain around 5% for 2024.
• The sale of HSBC Argentina is slated for completion in Q4 2024, with no significant impact on CET1 ratios.

Bearish Highlights

• There was a $0.3 billion decline in banking net interest income this quarter due to early redemption losses.
• A third-quarter ECL charge of $1 billion was noted, primarily due to cash flow pressures in the UK and Hong Kong commercial real estate sectors.

Bullish Highlights

• Strong growth in fee income was noted, particularly in Asia's wealth management and wholesale transaction banking.
• Anticipated corporate loan growth in Asia, supported by Mainland China and Hong Kong policy measures.
• Transaction banking income grew by 7% this quarter, with ongoing investments expected to fuel future growth.

Misses

• Net interest margin decreased to 146 basis points, affected by early redemption losses and funding allocations.
• A $1.1 billion increase in Asia wholesale Stage 3 assets, mainly from Hong Kong commercial real estate, was reported.

Q&A Highlights

• The structural hedge increased by $27 billion, targeting a run rate of $25 billion.
• The reorganization aims to simplify operations without splitting the Asian business.
• Management reaffirmed guidance for a mid-teens return on tangible equity for 2024 and 2025, excluding notable items.

In conclusion, HSBC's third-quarter earnings call highlighted solid growth and strategic reorganization to enhance operations. With a focus on corporate and institutional banking and wealth management, particularly in Asia and the Middle East, HSBC aims to maintain strong performance while adapting to market changes. Management remains optimistic about the medium-term outlook, with further updates expected in February 2025.

InvestingPro Insights

HSBC's solid Q3 performance is supported by data from InvestingPro, showing a market capitalization of $164.26 billion and a low P/E ratio of 7.47, indicating potential value for investors. The bank maintains a dividend yield of 4.26% and has raised its dividend for four consecutive years, showcasing a commitment to returning value to shareholders. Impressive operating income margins of 47.42% further bolster confidence in HSBC's profitability. The stock has seen a 42.44% total return over the past year, reaching 97.78% of its 52-week high.

Full Transcript – HSBC Holdings PLC DRC (HSBC) Q3 2024

Operator: Welcome, ladies and gentlemen, to the Analyst and Investor Webinar on the 3Q 2024 Results for HSBC Holdings plc. For your information, this webinar is recorded. I will now hand over to Georges Elhedery, Group Chief Executive.

Georges Elhedery: Thank you, Luis. Hello, everyone. Thank you for joining today. I'm here with Jon Bingham, our Group Financial Controller, who serves as Interim Group Chief Financial Officer. We delivered another good quarter, confirming that our strategy is effective and provides a strong platform for growth.

Jon Bingham: The third quarter profit before tax was $8.5 billion, up $0.9 billion or 11% year-on-year on a constant currency basis, and revenue of $17 billion was up $1.1 billion from last year. We announced further distributions consisting of a third interim dividend of $0.10 per share and an up to $3 billion share buyback, intended for completion before the full year results in February.

In summary, the quarter has shown robust revenue growth driven by increased fees in wealth management and strong performance in corporate banking.

Operator: Thank you, ladies and gentlemen, for joining today's webinar. You may now disconnect your lines.

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