Shares in HSBC (HSBA) gained 4% to £13.45 despite the global banking group posting a 7% drop in FY25 earnings. The bank took a swathe of charges last year for asset writedowns, legal provisions, restructuring and related costs.
| Share price: £13.45 (+4.2%) | PE: 19.3x |
| Market cap: £233bn | Yield: 3.7% |
Beating and raising
After a strong FY24, when pre-tax profit was helped by $1 billion of one-offs, FY25 pre-tax profit was $29.9 billion. That marked a 7.4% drop on the previous year but was still comfortably above the $28.9 billion consensus.
The bank took $4.9 billion of negative items including a $2.1 billion writedown on its Chinese subsidiary BoCom. It also took ‘reserve recycling’ losses of $1.5 billion and $1.4 billion of legal provisions and restructuring charges.
CEO Georges Elhedery called 2025 ‘a year of decisive action and swift execution’. He added: ‘We are becoming a simple, more agile, focused bank, delivering growth, investing for growth and executing our strategy.’
On an underlying basis, earnings rose $2.4 billion to $36.6 billion led by a strong performance in international wealth and premier banking. The Hong Kong business also performed well, as did wholesale banking, helping to offset higher bad loan charges.
Including negative items, ROTE (return on tangible equity) was 13.3% against 14.6% in FY24. Excluding items, however, ROTE – a key measure of banking profitability – was 17.2% against 15.6% the previous year.
Elhedery said the bank was raising its ROTE target for 2026 to 2028 to 17% or better based on these results. It was also looking to increase revenue each year, with growth rising to 5% in 2028.
Despite the hyperbole, and behind the charges, this is a strong set of results from the UK’s biggest bank by market cap. Setting a target of a return on tangible equity of 17% or more for the next three years is also pretty ballsy.
The bank has laid out plenty of other targets, from banking net interest income to operating costs and bad loan provisions, to keep analysts happy. For us, it’s nice to report on a company which doesn’t rely on share buybacks to please investors for once.
Read the press release here: https://www.hsbc.com/investors
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