Sentiment Score: -9

Sentiment Change: -24

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HSBC Holdings PLC Earnings - Analysis & Highlights for Q4 2024

Overview

PositivesNegativesOutlook

HSBC is well positioned to capture the structural opportunities in wealth management, especially in Hong Kong.
The company intends to take $1.5 billion out in terms of cost efficiencies within the group.
The company has proactively chosen to start recognizing $4.3 billion of legacy Tier 2 securities as both Tier 2 and MREL, and also $750 million senior HoldCo notes as MREL, which will reduce the MREL ratio by 54 basis points.
The company is well positioned in the UK opportunity.

Q4 2024 Earnings Call - Fixed Income

The company has seen headwinds in the Hong Kong commercial real estate market, where some clients have faced debt servicing challenges.
The company expects pressure on clients facing debt service challenges to relax as rates start to go down.

Q4 2024 Earnings Call - Fixed Income

The company intends to take $1.5 billion out in terms of cost efficiencies within the group.
The company sees opportunities for growth in non-NII.
The company sees opportunities to grow non-net interest income in the future.
The company expects to bring its CET1 ratio down to the target operating range of 14% to 14.5% over time.
The company has guided to double-digit Wealth growth.

Q4 2024 Earnings Call - Fixed Income

Q&A Highlights from HSBC Holdings PLC Earnings Call Q4 2024

Analyst asked about the legacy bonds in resolution and how they should be treated.
- The legacy bonds are still believed to be able to absorb losses in resolution. The company has taken actions to avoid the infection risk, but they are still committed to reducing their legacy stack. The company has been interacting with the Bank of England and has received necessary approvals to take the necessary actions. The company has been reducing its legacy stack for the past three years and is committed to continue to do so.
Analyst asked about double leverage and its impact on the company's risk appetite.
- Double leverage is not a concern for the company as it falls within their risk appetite and they have received approval from regulators and rating agencies. The company has a significant amount of liquidity at the holding company to manage any cash flow risks.
Analyst asked about the stage 3 balances in Hong Kong CRE and the impact on ECLs.
- The stage 3 balances have picked up in 2024, with 2.4% of gross loans being stage 3. However, the company is comfortable with the nature of the book in their Hong Kong business as the books have a low LTV and do not lead to credit losses. The company has their eye on the path of the NPL ratio, but it will be a game of in and out, with inflows and outflows.
Analyst asked about the unsecured portion of the Hong Kong domestic book, specifically the long-held properties that appear to be generational, and whether there are other buyers for these properties in Hong Kong today.
- The unsecured portion of the Hong Kong domestic book is wide and varied, with 54% secured and the remainder unsecured. The secured piece has seen flows into stage 3, but the LTVs remain strong, with minimal levels of ECL coming off those flows. The impaired book is around $4.6 billion, with a 58% LTV, and the substandard book is $3.7 billion, with a 46% LTV. The company has a competitive market to lend to large developers who are often listed and well-rated, and they are more than happy to continue to support that sector.

Q4 2024 Earnings Call - Fixed Income