HSBC Holdings PLC Earnings - Q4 2025 Analysis & Highlights
HSBC Holdings plc reported strong 2025 full-year performance with record profits, strategic progress on organizational simplification, and ambitious growth targets through 2028, while navigating interest rate headwinds and Hong Kong commercial real estate challenges.
Key Financial Results
Group revenues grew 5% year-over-year to $71 billion in 2025, excluding notable items on a constant currency basis.
Profit before tax reached a record $36.6 billion, up 7% year-over-year, excluding notable items on a constant currency basis.
Return on tangible equity was 17.2%, achieving the mid-teens or better target.
Cost growth was 3% on a target basis in 2025, in line with the cost target.
Full-year ordinary dividend per share of $0.75, up 14% on 2024.
Fourth quarter revenues grew 6% to $17.7 billion, driven by broad-based growth in banking net interest income and fee and other income.
Fourth quarter profit before tax was $8.6 billion, up 17%.
Customer deposit balances stand at $1.8 trillion, an increase of $78 billion when including held-for-sale balances.
Business Segment Results
Each of the four businesses grew revenues, with each returning mid-teens or better return on tangible equity, excluding notable items.
Banking net interest income was $44.1 billion for the full year, with fourth quarter banking NII of $11.7 billion growing $0.7 billion.
Hong Kong banking NII contributed $0.4 billion of growth in the fourth quarter, including recovery of HIBOR during the quarter.
Deposit balances grew 5% with deposit growth in each of the four businesses.
Transaction Banking fee and other income grew 4%, demonstrating the power of HSBC's deep international network providing access to 86% of world trade flows.
Wealth fee and other income grew 24%, reflecting leadership position in the world's fastest-growing wealth markets and continued investment in products and proposition.
Wholesale transaction banking security services grew 6% in the quarter, reflecting higher market valuations and new mandates.
Payments grew 3%, driven by new mandates and payment volumes, particularly international payments.
Foreign exchange increased by 1%, reflecting strong client flows and higher levels of volatility.
Trade was down 5% in the quarter but stable over the full year.
Wealth fee and other income growth of 20% year-over-year to $2.1 billion, driven by all four income areas.
Asset Management grew 14% and Private Banking grew 8%.
Investment Distribution performed well, up 14%, reflecting strength in customer franchise in Hong Kong.
Insurance CSM balance was $14.6 billion, up 21% versus prior year.
Net new invested assets of $7 billion in the fourth quarter, with $26 billion net new money in the quarter, of which $19 billion was in Asia.
Hong Kong added 1.1 million new-to-bank customers, taking total customers to more than 7 million.
UK business banking lending grew 13% year-on-year, excluding COVID loan runoff.
Corporate surveys positioned HSBC as a market leader in trade, payments, and foreign exchange.
International Wealth and Premier Banking attracted net new invested assets of $80 billion.
Capital Allocation
CET1 capital ratio was 14.9%, up 40 basis points in the quarter, reflecting organic capital generation.
HSBC completed the $13.7 billion privatization of Hang Seng Bank on January 26, sooner than initial expectation of first half of 2026.
Removal of $3.8 billion minority capital inefficiency from the privatization, resulting in $9.9 billion of common equity Tier 1 consumption.
$9.9 billion CET1 consumption is equivalent to buying back 4% of group shares at the point of announcement.
$0.8 billion minority interest in the P&L and $0.5 billion of pre-tax synergies from the privatization.
Minority interest and synergies contribute more than 4% to profit, beating the buyback threshold.
Further revenue and cost upside of $0.4 billion enabled by the privatization.
No further buybacks expected for up to three quarters following October's announcement of intention to privatize Hang Seng Bank.
Dividend payout ratio of 50% for each year excluding material notable items.
Industry Trends and Dynamics
Global trade is being rewired, with Asia's growth increasingly powered by intra-Asia demand.
Asia is buying Asia, demonstrating structural shift in global trade patterns.
The Middle East is scaling as a global capital, trade and investment hub, with integration with Asia accelerating.
The Asia/Middle East corridor is becoming a defining axis of global growth.
Wealth creation across Asia and the Middle East is structurally strong.
Customers are making real-time 24/7 payments across 35 markets.
Frictionless tokenized deposits and payments are being used in four markets, including the UK, with more to follow.
UK Treasury selected HSBC's distributed ledger technology as its preferred platform for its UK Digital Gilt pilot.
Transaction Banking franchise validated in a range of economic, market and tariff situations.
Global network helped customers navigate volatility and uncertainty.
Retail sales in Hong Kong turned positive in May and are now up 6.6% year-on-year.
Residential component of Hong Kong commercial real estate is near normalized, with HPI up 5% year-on-year in 2025 and 10% growth in sales volume.
Office vacancy rates in Hong Kong still around 17%, with some green shoots in rental demand and transactions for best properties.
Competitive Landscape
HSBC is market leader in Hong Kong, undisputed, consolidating and cementing this leadership.
HSBC is the leading international wealth manager in China Mainland onshore.
HSBC positioned as market leader in trade, payments, and foreign exchange by corporate surveys.
30,000 businesses voted HSBC as leader in payments in product services and technology.
HSBC is nine-year consecutive leader in trade.
Corporates using foreign exchange voted HSBC as leader in servicing them with foreign exchange.
HSBC is market leader in Hong Kong wealth balances.
HSBC is a net investor in people in Hong Kong and investing in technology to capture growth opportunities.
Macroeconomic Environment
Hong Kong is a dynamic economy, a top three global financial center and thriving trade gateway.
Hong Kong is the super connector between Mainland China and the world, set to become the world's leading cross-border wealth hub by 2029.
Business has been resilient despite evolving scenarios on tariffs and trade, with overall business up 2% year-on-year in 2025.
Relationships and engagement with clients gets stronger in complex market landscape as it evolves.
HSBC took market share in corridors through eight in Hong Kong, UK, Asia overall as supply chains are moving and corridors are shifting.
Headwinds and tailwinds exist for both the world at large and for HSBC.
Interest rates in the US down 50 basis points and UK down 25 basis points year-to-date, with further two to three rate cuts expected.
Expected lower rates more than offset by deposit growth and tailwind from structural hedge.
Full-year 2026 banking NII of at least $45 billion expected, with impact of expected lower rates more than offset by deposit growth and structural hedge tailwind.
ECL charge of around 40 basis points expected for 2026, at the higher end of typical range, reflecting economic outlook and remaining pressures in parts of retail and office commercial real estate in Hong Kong.
China commercial real estate portfolio down to less than $1.5 billion, with ECLs below $200 million for the year.
Credit impaired names with LTV over 70% stand at $1.9 billion, with ECLs around $900 million.
Growth Opportunities and Strategies
HSBC operates on four core complementary businesses: two home market businesses (UK and Hong Kong) and two international network businesses (Corporate and Institutional Banking and International Wealth and Premier Banking).
Three clear strategic priorities: be simple and agile; drive customer centricity; and deliver focused sustainable growth.
Reduced net managing director positions by circa 15% in 2025.
$1.5 billion of annualized simplification saves being taken straight to the bottom line with immaterial revenue impact.
Expected to have taken action to deliver simplification saves by first half of 2026, six months ahead of plan.
$1.5 billion reallocation from non-strategic or low-returning businesses to areas of competitive strength.
11 business or market exits announced in 2025.
Completed and announced exits account for $0.7 billion in annualized cost savings, with around $1 billion of associated revenue.
$0.6 billion remains in active execution, including those under strategic review.
$0.3 billion of reported basis cost synergies across HSBC and Hang Seng Bank following privatization.
$0.3 billion directed to growth opportunities in Hong Kong.
Streamlining and upgrading operating model by simplifying the bank at scale and retiring non-strategic applications.
Net promoter scores improved or remain top ranked in home markets.
Hang Seng Bank privatization enables scaling of capabilities and driving growth across both banks for all customers.
$0.9 billion of benefits through reported synergies and unlock of opportunities by 2028 from Hang Seng privatization.
Investing to consolidate powerhouse position in Asia/Middle East and capture growth opportunities.
Scaling capabilities and building new capabilities to connect the world and support customers in secure commercial advantage from real-time services.
Scaling AI adoption to empower colleagues, for end-to-end process reengineering, and to enhance customer experience.
AI strengthens how HSBC acts on customer trust, personalizing service at scale.
Investing to nurture high-performance culture, with all senior leaders and broader managing director cohort attending new group-wide leadership training.
26 or 27 wealth centers launched in 2025, taking total to 64.
Hiring relationship managers and wealth advisors.
Empowering with generative AI wealth capabilities and building technology.
Creating comprehensive set of products and continuing investment in wealth space.
Demised more than 1,100 applications in 2025, out of about 3,000 applications deemed non-strategic and looking to demise.
Running about 9,000 applications, of which 3,000 are flagged for demise between now and 2028.
Moved from cloud-first strategy to more mature approach to cloud by looking at optimization of hosting of applications.
Generative AI investment going into three workstreams: making generative AI available to colleagues; fundamental re-engineering of processes end-to-end; and enhancing customer experience at customer touch points.
85% of colleagues mostly enabled with generative AI tools.
31,000 engineers already enabled with coding assistants, seeing 60% speeding up in unit testing and 5 times faster patching of code vulnerabilities.
50 processes already under review for generative AI integration, with some already delivered such as onboarding and KYC.
Generative AI tools rolled out to relationship managers, wealth advisors, and contact center operators to personalize at scale.
Doing generative AI with safety and security at the forefront, reviewing, monitoring, and auditing everything.
Keeping controls, resilience, and human accountability always present as a regulated industry.
Hang Seng Bank will retain its own authorized institution and governance.
Hang Seng Bank will retain its own brand in Hong Kong as a major community bank and largest local bank.
Hang Seng Bank will retain independent customer proposition that will compete in the market for all customers.
Hang Seng Bank will retain its branch network, with proposition remaining intact with distinctive cultural strength.
Better efficiencies in cross-selling and aligning back office or manufacturing capabilities through privatization.
Post-privatization, no arm's length relationship restriction prevents more in terms of product proposition offerings and cross-referral to customers.
Investment dollars can be spent seamlessly across both red brand and green brand on same product and customer journeys.
Two fully owned banks position HSBC well to capture growth in Hong Kong.
Acquiring a business with structurally high pre-impairment margins.
Credit cycle is a cycle, with belief in normalization.
Hang Seng Bank privatization will allow consolidation of leadership even further across broad range of products and services.
HSBC is privileged to be positioned to capture growth with full HSBC and Hang Seng propositions.
Hang Seng Bank revenue synergies from providing broader product proposition to green brand, including better wealth products for retail customers.
Capital markets and broader Wholesale Transaction Banking products for wholesale customers through Hang Seng privatization.
Access to same international network for red brand also available within green brand.
More balance sheet flexibility in leveraging Treasury capabilities and upstreaming/downstreaming capital.
Hang Seng benefits will be done over next three years.
Credit cycle normalization will bring benefit from improved asset quality and more growth in lending.
Overall Hong Kong growth will continue with redeployment of cost allocations.
Fair chunk of benefits goes into Hong Kong, a core market on strategy.
HSBC is fundamentally a relationship bank with full service suite of products offered to customers.
Financial Guidance and Outlook
Target revenues growing year-on-year every year, rising to 5% in 2028, excluding
