Volkswacht Bodensee - HSBC banks lower profits on higher costs

Profit after tax dropped by one third to $12.4 billion compared with the first six months of 2024, hit by restructuring costs and an impairment on its stake in a Chinese lender.

The London-headquartered bank is months into a shakeup aimed at simplifying the group's structure and delivering $1.5 billion in annual cost savings in 2027.

It comes as the bank sector faces volatile trading as a result of US President Donald Trump's tariffs onslaught.

"We have delivered these results in an ongoing period of uncertainty," chief executive Georges Elhedery said in call with reporters Wednesday.

"It has become increasingly important to simplify the organisation and make it more agile for further growth," he added.

The bank recorded a $2.1 billion impairment linked to its stake in China's Bank of Communications, which was recapitalised by the country's finance ministry this year.

Elhedery said that HSBC is "making positive progress" in its structural overhaul, which began in October, shortly after he became chief executive.

Operating expenses increased four percent, which the bank partly attributed to restructuring and related costs.

The bank generates most of its revenue in Asia and has spent several years pivoting to the region, vowing to develop its wealth business and target fast-growing markets.

HSBC shares fell around 2.5 percent in morning deals on London's top-tier FTSE 100 index despite a dividend payment and plans to repurchase up to $3 billion of shares.

- Missed expectations -

Elhedery said HSBC is "well positioned to manage the changes and uncertainties prevalent within the global environment in which we operate, including in relation to tariffs".

He noted that a "broader macroeconomic deterioration" could impact returns in future years.

Profit before tax fell more than 26 percent to $15.8 billion, falling short of analyst expectations.

First-half revenue declined nine percent to $34.1 billion.

"Repositioning HSBC is not a simple task given its size and scale," said Russ Mould, investment director at AJ Bell.

"There are also challenges in its priority regions such as property market weakness in Hong Kong and mainland China.

"It means investors must continue to brace themselves for setbacks in its results well into 2026," he added.

In Hong Kong, HSBC shares in were down 3.8 percent at the close.

Morningstar senior equity analyst Michael Makdad said the bank "needs to make sure that shareholders in Asia remain on board with the strategic direction... centred on simplification and intensive cost-cutting, but without a radical overhaul of the entire business model".

Makdad added that its immediate challenge is to find a replacement for board chairman Mark Tucker, who will retire by the end of 2025 after eight years helping to steer Europe's largest bank.

U.Maertens--VB