HSBC Q3 2024 $HSBA (-0.91%)

Financial performance

HSBC reported profit before tax of USD 30.0 billion for the first nine months of 2024, up slightly from USD 29.4 billion in the same period last year. This growth was supported by a stable revenue performance, with revenues increasing from USD 53.0 billion to USD 54.3 billion. The cost efficiency ratio rose slightly to 45.0% from 44.2% previously, indicating a slight increase in operating costs.

Balance sheet analysis

As of September 30, 2024, HSBC's total assets grew to USD 3.1 trillion, an increase of USD 124 billion since June. This growth was mainly driven by higher repurchase agreements, increased loans and advances to banks and an increase in financial investments. Customer loans increased to USD 968.7 billion from USD 938.3 billion, reflecting solid demand for credit.

Income statement

The income statement shows a stable sales trend. On a constant currency basis and excluding special effects, sales amounted to USD 50.9 billion for the first nine months. However, the net interest margin fell slightly to 1.57% from 1.70%, indicating lower profitability in the lending business.

Cash flow analysis

Growth in customer deposits and lending indicates strong cash flows from operating activities. Customer deposits increased by USD 67 billion, strengthening HSBC's liquidity position.

Key performance indicators and profitability

Return on common shareholders' equity was 17.9%, down slightly from 18.3% last year, while average return on tangible equity was 19.3%, compared to 19.7% previously. The Common Equity Tier 1 (CET1) ratio improved to 15.2%, indicating a solid capital base and lower risk profile.

Segment analysis

The Wealth and Private Banking segment recorded strong growth momentum, with the volume of assets increasing by 15% to USD 1.9 trillion. The corporate banking business also expanded, particularly through growth in term lending in the UK and other key markets, reflecting HSBC's strategic focus on credit expansion.

Competitive analysis

HSBC continues to expand internationally and diversify its revenue streams, particularly in Asia. The strategic steps, such as the acquisition of SVB UK and disposals in France and Canada, are part of a comprehensive strategy to optimize the portfolio and focus on growth regions.

Forecasts and management commentary

Management is targeting a return on tangible equity in the mid-teens, excluding special effects, for 2024 and 2025. The bank continues to focus on growth in Asia and strict cost control as key strategic elements.

Risks and opportunities

Geopolitical tensions, particularly in the Middle East and between China and Western nations, pose risks that could impact the business. However, HSBC is well positioned to benefit from growth opportunities in the Asian asset sector and to take advantage of recent portfolio shifts.

Summary and strategic implications

HSBC's Q3 2024 results reflect stable financial health, with strategic acquisitions and divestments likely to shape its future direction. The Bank's focus on growth in Asia and wealth management as well as the strengthened balance sheet provide a solid foundation for further growth. At the same time, prudent risk management in the face of geopolitical and economic uncertainties will be crucial for continued success. Remains on the watchlist due to too many financial stocks in the portfolio.

Positive statements

• Profit Growth: HSBC reported a pre-tax profit of USD 30.0 billion for the first nine months of 2024, an increase on the previous year.
• Asset Growth: Total assets increased to USD 3.1 trillion, reflecting strong growth supported primarily by repurchase agreements and loans.
• Wealth Management Success: Assets in Wealth and Personal Banking increased by 15% to USD 1.9 trillion, indicating a positive development in this segment.
• Strategic transactions: The acquisition of SVB UK and divestments in France and Canada are strategic moves to realign HSBC's portfolio in line with its growth strategy.
• Strong CET1 ratio: The CET1 ratio improved to 15.2%, underlining the Bank's solid capital position.

Negative statements

• Falling net interest margin: The net interest margin fell slightly from 1.70% to 1.57%, indicating pressure on interest income.
• Slight decline in return on equity: The return on equity for ordinary shareholders fell to 17.9% from 18.3%, indicating slightly reduced profitability.
• Geopolitical risks: Tensions in the Middle East and between China and Western countries pose significant risks to business operations.
• Market volatility: Increased volatility, particularly as a result of political changes in China, has led to increased customer activity, which could result in unstable revenue streams.
• Exposure to economic uncertainty: The Bank is exposed to risks arising from economic uncertainty, including the potential impact of inflation and interest rate fluctuations.