HSBC Beats Profit Estimates and Sets Aggressive Cost-Cutting Targets – Announces $2 Billion Share Buyback Program

HSBC has reported an annual profit that exceeded market expectations, driven by strong revenue growth in its wealth and markets divisions. As part of an ongoing restructuring, the bank has also outlined stringent cost-cutting measures under its new CEO, Georges Elhedery, as he pushes to enhance returns and sharpen HSBC’s focus on Asia.

The bank announced a $2 billion share buyback program, which it intends to complete before its next earnings report.

Elhedery, who took over in September last year, has initiated an extensive restructuring plan at a time when global banking conditions remain uncertain. Diverging central bank policies have added complexity to the economic landscape, with the eurozone poised to cut interest rates, the U.S. maintaining stability, and Japan expected to implement rate hikes.

For 2024, HSBC reported a pre-tax profit of $32.3 billion, showing resilience despite declining interest rates. This figure surpassed the $30.3 billion recorded a year earlier and exceeded analyst estimates, which had averaged $31.7 billion.

In a move to streamline operations, HSBC set a cost reduction target of approximately $300 million for 2025, with a broader aim of trimming $1.5 billion from its annual expenses by the end of 2026. Elhedery emphasized that the bank had renewed its efforts to optimize resource allocation across geographies, business lines, and its balance sheet. He stated that these initiatives would enable HSBC to manage costs and capital more dynamically while making targeted investments.

Following the earnings announcement, HSBC’s Hong Kong-listed shares climbed over 1% in afternoon trading, even as the broader market index dipped 0.1%.

Senior Equity Analyst Michael Makdad at Morningstar observed that while HSBC’s plans to cut personnel expenses by 8% over 2025 and 2026 were a positive step, the bank had not introduced any radical overhaul or dramatic cost-cutting measures. He noted that improving efficiency at a bank of HSBC’s scale required careful coordination of numerous small and mid-sized adjustments.

The bank also reaffirmed its performance target, aiming for a mid-teens return on average tangible equity from 2025 to 2027. However, it acknowledged that interest rate volatility could introduce challenges in the medium term.

HSBC’s wealth and personal banking division, the company’s largest revenue generator, posted a pre-tax profit of $12.2 billion in 2024—a 5.2% increase from the previous year—fueled by customer growth and increased sales of wealth management products. Meanwhile, profit from global banking and markets surged nearly 27% to $7.1 billion.

Additionally, HSBC announced a fourth interim dividend of $0.36 per share, bringing the total payout for 2024 to $0.87 per share. This includes a special dividend of $0.21 per share, following the sale of its Canadian business.

Since stepping into the CEO role, Elhedery, a longtime HSBC executive and former CFO, has moved more swiftly than some analysts and investors anticipated in reshaping the bank. He has aggressively reduced senior management ranks and reorganized HSBC’s operations along East-West lines.

As part of this strategic shift, HSBC has significantly scaled back its mergers-and-acquisitions and equity capital markets teams in Europe and the Americas, marking its most substantial retreat from investment banking in decades. This move further accelerates the bank’s pivot toward Asia, where it continues to generate the bulk of its earnings.

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