HSBC Holdings plc 3Q25 results announcement

October 28, 2025 HSBC Group Announcement $HSBA (-1,38 %) on the figures for the third quarter:

Georges Elhedery, Group CEO, said:

"We are becoming a simpler, more agile and more focused bank, building on our core competencies. The intent with which we are executing our strategy is reflected in our performance this quarter, despite having taken legal provisions related to historical matters. The positive progress we are making gives us confidence that we can raise our targets and we now expect RoTE to be mid-teens or better in 2025 with no significant items. We remain fully focused on helping our customers navigate the new economic realities by putting their changing needs at the heart of everything we do."

Financial performance in 3Q25

Reported profit before tax of USD 7.3 billion was USD 1.2 billion lower than in 3Q24. The decrease reflected an increase in operating expenses primarily due to notable items in 3Q25, including legal provisions of $1.4 billion. This was partially offset by revenue growth, which included an increase in net interest income ('Banking NII') and strong performance in assets, while fee and other income declined in global foreign exchange, debt and equity markets. Profit after tax of $5.5 billion was $1.2 billion lower than 3Q24.
Currency adjusted profit before tax excluding significant items amounted to $9.1 billion, an increase of $0.3 billion or 3% compared to 3Q24, as revenue growth, driven by continued strong asset performance, was partially offset by an increase in operating expenses due to planned capital expenditures and inflationary impacts.
The annualized return on average tangible equity ("RoTE") was 12.3% in 3Q25, compared to 15.5% in 3Q24. Excluding notable items, the annualized RoTE in 3Q25 was 16.4%, which corresponds to an increase of 0.5 percentage points compared to 3Q24.
Sales increased by $0.8 billion or 5% to $17.8 billion compared to 3Q24. In our International Wealth and Premier Banking ("IWPB") and Hong Kong business segments, we saw growth in fee and other income in Wealth, supported by higher client activity, while fee and other income declined in Global Foreign Exchange and in Debt and Equity Markets in our Corporate and Institutional Banking ("CIB") segment due to lower client activity amid lower market volatility. The increase also reflects growth in Banking NII. Constant currency revenue excluding significant items increased by $0.5 billion to $17.9 billion.
The Net interest income (NII) of USD 8.8 billion increased by USD 1.1 billion or 15 % compared to 3Q24, which included a benefit from the absence of a loss of USD 0.3 billion in 3Q24 from the early redemption of legacy securities. The increase also reflects deposit growth and the benefit of our structural hedge, which was partially offset by a $0.3 billion decrease due to the divestiture of our business in Argentina. The decline in interest rates reduced trading book funding costs by $0.7 billion compared to 3Q24, resulting in an increase in NII in the banking business of USD 0.5 billion or 4% to USD 11.0 billion.
The Net interest margin (NIM) increased by 11 basis points ('bps') compared to 3Q24 from 1.57%, including a benefit from the non-recurrence of a loss on the early redemption of legacy bonds in 3Q24, partially offset by the divestment of our business in Argentina. Net interest income increased by 1 basis point compared to 2Q25 as an increase in net interest income was partially offset by an increase in average interest earning assets (AIEA).
Expected credit losses (ECL) of USD 1.0 billion remained stable compared to 3Q24. The charge in 3Q25 was primarily related to Level 3 wholesale risk fees, including incremental fees related to the Hong Kong commercial real estate sector, a charge on a Middle East exposure and fees on a small number of exposures in our UK business. This was partially offset by releases due to a stabilization in the macroeconomic outlook in 3Q25. ECL in 3Q24 included expenses for exposures in the onshore Hong Kong CRE and Mainland China CRE sectors.
Operating expenses of US$10.1 billion were US$1.9 billion or 24% higher than in 3Q24. The increase reflects notable items including $1.4 billion of legal provisions for historical matters, including $1.1 billion related to the development of a claim in Luxembourg related to the Madoff securities fraud and $0.3 billion related to certain historical trading activities of HSBC Bank plc. Notable items also included restructuring and other related costs associated with our organizational simplification of $0.2 billion. There were also higher planned expenditure and investment in technology and the impact of inflation. These increases were partially offset by the impact of the divestment of our business in Argentina and the benefits of our restructuring measures. Operating expenses on a base basis were $8.4 billion, $0.3 billion or 3% higher than 3Q24.
Customer loan balances increased $1.2 billion compared to 2Q25, including adverse currency translation effects. On a constant currency basis, loan balances increased by USD 5.6 billion, including growth in commercial customer loans and mortgages in our UK business as well as an increase in IWPB from private bank lending in Hong Kong and Singapore and growth in mortgage balances in Singapore and Australia.
Customer accounts increased by USD 18.6 billion compared to 2Q25, including unfavorable currency translation differences. On a constant currency basis, customer accounts increased by USD 25.5 billion, driven by CIB growth in Asia, Europe, the UK, the Middle East and the US.
The Common Equity Tier 1 capital ratio (CET1) decreased by 0.1 percentage points compared to Q2 25 by 0.1 percentage points, which was due to a decrease in Common Equity Tier 1 (CET1) capital reflecting the recognition of statutory provisions of USD 1.4 billion in 3Q25, partially offset by a decrease in risk-weighted assets ("RWAs"). The decrease in risk-weighted liabilities was mainly due to a reduction in risk-weighted market riska and changes in methodology and policy for risk-weighted credit risk values.
The Board of Directors has declared a third interim dividend for 2025 of USD 0.10 per share. On October 24, we completed the USD 3 billion share buyback announced at our interim results on July 30, 2025.

Financial performance in 9M25

Reported profit before tax decreased by USD 6.9 billion to USD 23.1 billion compared to 9M24, mainly due to a year-on-year impact of USD 8.2 billion from notable items, including the absence of USD 3.6 billion of net gains in 9M24 related to our divestitures in Canada and Argentina, the recognition of USD 2.1 billion of dilution and impairment charges in 9M25 related to our subsidiary Bank of Communications Co, Limited ("BoCom"), statutory provisions of USD 1.4 billion and restructuring and other related costs in connection with our organizational simplification of USD 0.8 billion in 9M25. Profit after tax decreased by USD 6.5 billion to USD 17.9 billion compared to 9M24.
Currency adjusted profit before tax excluding significant items amounted to USD 28.0 billion, an increase of USD 1.2 billion or 4 % compared to 9M24, as higher fee and other income growth in assets in our IWPB businesses and Hong Kong and from foreign exchange, debt and equity markets in our CIB business segment mitigated an increase in ECL and a planned increase in operating expenses.
The annualized RoTE in 9M25 was 13.9%, compared to 19.3% in 9M24. Excluding notable items, the annualized RoTE in 9M25 was 17.6%, which corresponds to an increase of 0.9 percentage points compared to 9M24.
Sales decreased by USD 2.4 billion or 4% to USD 51.9 billion compared to 9M24, reflecting the impact of notable items compared to the prior year, mainly from divestitures in Canada and Argentina in 9M24. Excluding notable items, revenue increased, primarily due to growth in fees and other income in the asset, foreign exchange, debt and equity markets of CIB. Constant currency revenue excluding significant items increased by USD 2.4 billion to USD 53.3 billion compared to Q24.
NII of $25.6 billion increased by $1.1 billion compared to 9M24, including a negative impact of $1.5bn from business disposals in Argentina and Canada, which was partially offset by the positive impact of the absence of a $0.3bn loss in 3Q24 on the early redemption of legacy securities. NII growth was driven by the benefit of our structural hedge, an increase in deposits and lower funding costs, which mitigated the impact of lower market interest rates. The decline in interest rates reduced trading book funding costs by USD 1.5 billion, resulting in a USD 0.4 billion decrease in Bank NII to USD 32.4 billion.
The net interest effect was a net interest effect of 1.57% compared to 9M24, as the improved margins in our main markets were offset by the impact of the divestment of our business in Argentina.
ECL amounted to USD 2.9 billion, an increase of USD 0.9 billion compared to 9M24. The increase included higher charges of $0.6 billion related to the CRE sector in Hong Kong, which included higher impairment charges for new defaulted risk exposures, the impact of an oversupply of non-residential real estate which has exerted continued downward pressure on rental and capital values, and updates to our models used for ECL calculations. The increase also included a charge for an exposure to the Middle East in the third quarter. In 9M24, the ECL charge benefited from the release of certificates, mainly in the UK, and a recovery relating to a single CIB client. Annualized ECL expenses were 40 basis points of average gross loans, including loans and advances classified as held for sale.
Operating expenses increased by USD 2.7 billion, or 11%, to USD 27.1 billion compared to 9M24. The increase primarily reflects notable items in 9M25, including legal provisions of USD 1.4 billion, restructuring and other related costs associated with our organizational simplification of USD 0.8 billion and USD 0.2 billion related to strategic transactions. In addition, there were higher planned expenditures and investments in technology and the impact of inflation. These increases were partially offset by reductions related to our business disposals in Canada and Argentina and the benefits of our organizational simplification. Operating expenses on a target basis increased $0.7 billion, or 3%, compared to the 24th quarter, primarily due to higher expenses and targeted investments in technology as well as the impact of inflation.

Outlook

We expect to achieve RoTE in the mid-teens or better for 2025, with no significant items. This reflects the continued momentum in earnings across our four divisions in the third quarter and the positive progress we are making in implementing our strategy. Our guidance reflects a seasonally lower RoTE in the fourth quarter, which includes historically lower client activity in the wealth division and certain cost items specific to the fourth quarter (e.g. the UK bank levy). This also includes higher capitalization following our announcement to temporarily not initiate share buybacks as part of our proposal to privatize Hang Seng Bank Limited ("Hang Seng Bank").
We remain confident that we can achieve our mid-teens RoTE target with no significant items for 2026 and 2027.
We now expect the bank NII to be USD 43 billion or more in 2025, reflecting reflecting increased confidence in the near-term direction of policy rates in key markets, including Hong Kong and the UK.
We continue to expect ECL fees as a percentage of average gross loans to be around 40 basis points in 2025 (including loans held for sale).
The targeted growth in operating costs on a 2025 basis compared to 2024 remains at around 3%, including the impact of savings related to the announced restructuring in connection with simplification.
While loan demand remained subdued in the first nine months of the year, we expect continue to expect customer loan balances to grow in the mid-single-digit percentage range year-on-year in the medium to long term.
We continue to expect average annual growth in the double-digit percentage range for fees and other income from assets.
We are sticking to our medium-term target range for the Common Equity Tier 1 (CET1) ratio of 14% to 14.5%. The expected impact on capital of the proposed Hang Seng Bank privatization transaction on day one is a net reduction of approximately 125 basis points, which would occur following the adoption of the relevant resolutions with the required majority at the Hang Seng Bank Court Meeting and the Hang Seng Bank AGM. Having announced that we will temporarily not initiate share buybacks, we expect to increase Common Equity Tier 1 capital prior to completion of the transaction, and although we may fall short of our Common Equity Tier 1 target range if the expected capital impact materializes on day one, we expect to bring our Common Equity Tier 1 ratio back into our target range through a combination of organic capital generation and the impact of no share buybacks. A decision on the resumption of buybacks is subject to our usual quarterly buyback considerations and processes. We maintain our dividend payout ratio target of 50% for 2025, excluding material notable items and associated impacts.

Our targets and expectations reflect our current outlook for the global macroeconomic environment and market-dependent factors, such as market-implied interest rates (as of mid-October 2025) and exchange rates, as well as customer behavior and activity levels.

We do not reconcile our forecast for RoTE excluding the impact of notable items, operating expenses on a target basis, dividend payout ratio, target basis or NII in banking with the corresponding reported metrics.

See page 6 for a further explanation of RoTE excluding notable items, Bank NII, Operating expenses on a target basis and Dividend payout ratio target basis. Further information on our CET1 ratio can be found on page 51.