HSBC Holdings plc ((HSBC)) has held its Q3 earnings call. Read on for the main highlights of the call.
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The latest earnings call from HSBC Holdings plc was marked by a generally positive sentiment, underscored by strong revenue growth and strategic upgrades to financial targets. The company reported solid performance in its Wealth management segment and a significant increase in customer deposits. However, concerns were raised regarding legal provisions and ongoing challenges in the Hong Kong commercial real estate sector.
Strong Revenue Growth
HSBC reported an impressive increase in total revenues, which rose by $500 million to reach $17.9 billion. This growth was largely driven by a 29% surge in fee and other income from the Wealth segment, highlighting the bank’s successful strategies in this area.
Positive RoTE Performance
The bank achieved an annualized Return on Tangible Equity (RoTE) of 16.4% in the third quarter and 17.6% year-to-date, excluding notable items. This performance reflects HSBC’s effective management and operational efficiency.
Customer Deposit Growth
HSBC experienced significant growth in customer deposits, with balances increasing by $86 billion to a total of $1.7 trillion. This growth includes held-for-sale balances, indicating strong customer confidence in the bank.
Upgraded Financial Targets
The bank has upgraded its financial targets for 2025, projecting its banking net interest income (NII) to reach $43 billion or better. Additionally, HSBC expects its RoTE to be in the mid-teens or better, excluding notable items, reflecting its optimistic outlook for future performance.
Strategic Investments and Exits
HSBC announced its intention to privatize Hang Seng Bank and exit nonstrategic activities, including HSBC Malta and Retail Banking in Sri Lanka. These moves are part of its broader strategy to focus on core growth areas.
Wealth Management Expansion
The bank’s Wealth management segment saw net new invested assets of $29 billion, with more than half originating from Asia. This growth underscores HSBC’s successful expansion strategy in the Wealth management sector.
Legal Provisions Impact
HSBC recorded $1.4 billion in legal provisions related to historical matters, including $1.1 billion associated with Madoff litigation. These provisions highlight ongoing legal challenges that the bank is addressing.
Challenges in Hong Kong Commercial Real Estate
The bank reported an increase in the Stage III loan ratio from 16% to 20% in the Hong Kong commercial real estate sector, indicating persistent challenges in this market.
Forward-Looking Guidance
Looking ahead, HSBC’s Group CFO Pam Kaur emphasized the bank’s robust financial position and strategic initiatives. The bank is targeting a 2025 banking NII of $43 billion or better and expects its RoTE to be in the mid-teens. HSBC is also pursuing strategic growth through privatization and strategic exits, aiming for around 3% cost growth in 2025 compared to 2024.
In summary, HSBC’s earnings call reflected a positive outlook with strong revenue growth and strategic upgrades to financial targets. The bank’s Wealth management and customer deposit segments performed well, although challenges remain in legal provisions and the Hong Kong commercial real estate market. Overall, HSBC is well-positioned for future growth, with clear strategic initiatives and financial targets in place.