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HSBC unveiled a goal of saving $300mn this year and cutting $1.5bn from its annual cost base by the end of next year, as it detailed the impact of chief executive Georges Elhedery’s overhaul for the first time.
The bank said on Wednesday it would aim to redeploy about $1.5bn from “non-strategic activities” to areas where it had a competitive advantage. It expected its actions to trigger $1.8bn in upfront costs, including severance, in 2025 and 2026.
HSBC gave the figures in its full-year earnings report, which showed a pre-tax profit of $2.3bn in the final three months of last year, up $1.3bn on last year’s figure.
Since becoming chief executive in September, Elhedery has embarked on a dramatic restructuring of the UK-based bank. The changes include redrawing HSBC’s operations into “eastern” and “western” units, closing key parts of its investment banking business and merging two of its three main units. In the process, it is axing an expensive layer of senior bankers.
“I have put in place a smaller, core team of exceptionally talented leaders driven by a growth-orientated mindset and a firm focus on dynamically managing our costs and capital . . . we look to the future with confidence and clarity of purpose,” said Elhedery.
HSBC’s Hong Kong-listed shares rose as much as 1.3 per cent on Wednesday but have since pared gains to be up 0.7 per cent.
The report set out a proposed pay package worth up to £15.3mn for Elhedery, which could rise to £19.8mn if the bank’s share price jumps 50 per cent. The bank held the total value of its bonus pool steady at $3.8bn for 2024.
The number of full-time equivalent staff fell by more than 9,500 last year to 211,304, partly due to the sale of HSBC units, including in Canada, France and Argentina.
Pre-tax profit for the year to December rose 6.6 per cent to $32.3bn, beating analysts’ estimates of $31.7bn.
HSBC unveiled a fourth interim dividend of 36 cents a share, taking the 2024 total to 87 cents, and said it planned a $2bn share buyback, the latest of a series in recent years.
Costs rose 3 per cent to $33bn, due partly to inflation and investment in technology, said the bank.
Its net interest margin, a crucial measure of lending profitability, fell by 10 basis points to 1.56 per cent.
The margin — the difference between the interest the bank receives from making loans and the rate it pays out to depositors — rose alongside interest rates in recent years but started falling last year, a sign that the boost from rising rates has tailed off.
That puts the bank under pressure to cut costs and boost income in areas less dependent on higher rates. Net interest income, which accounts for more than half its total revenue, was $32.7bn for the full year, down from $35.8bn a year ago.
The bank reported $4.6bn in defaulted commercial real estate loans to Hong Kong borrowers, excluding exposure to those in mainland China. The figure rose almost eightfold from $576mn a year earlier, as the territory’s real estate market struggles. The credit-impaired Hong Kong loans comprised 14 per cent of HSBC’s total commercial real estate lending in the territory and 6.3 per cent of its commercial real estate lending globally.
It made $3.4bn in provisions for bad loans, more than the $3.1bn analysts had expected, as it braced for losses linked in part to Hong Kong and Chinese property.
The bank reported just over $1bn in investment banking revenues for 2024, a fraction of its total revenues of $65.9bn. HSBC said last month it was closing its mergers and acquisitions advisory and its equity capital markets businesses outside Asia and the Middle East.
Its return on tangible equity, a measure of profitability, was 14.6 per cent, in line with the previous year’s figure.
