HSBC Holdings PLC has reported annual profits that exceeded analyst expectations despite a decline from the previous year, while raising its medium-term returns outlook. The global banking giant announced pre-tax profit of $29.9 billion for 2025, down 7.4% year-over-year but surpassing the average analyst forecast of $28.9 billion. The HSBC profit results demonstrate resilience amid significant one-time charges and restructuring efforts.
The bank attributed the profit decline primarily to $4.9 billion in notable items that weighed on the headline figures. These charges included $2.1 billion in losses related to its stake in China’s Bank of Communications, $1.5 billion from selling its French loan book, and $1.4 billion in legal provisions, including costs associated with the Bernie Madoff lawsuit settlement.
HSBC Profit Performance Beats Expectations on Underlying Basis
When excluding the notable items and currency fluctuations, HSBC profit actually increased by approximately 7% to $36.6 billion on an underlying basis. This stronger performance helped drive the bank’s return on tangible equity to 13.3% on a reported basis, or 17.2% when adjusted for one-time charges. The results highlight the bank’s core operational strength despite external headwinds.
Revenue for the year climbed roughly 4% to $68.3 billion, beating consensus estimates of $67.4 billion. Net interest income, a key measure of lending profitability, rose 6% to $34.8 billion as the bank’s net interest margin improved to 1.59% from 1.56% in the prior year. However, these gains were partially offset by rising operating expenses linked to legal provisions, restructuring charges, strategic investments and inflationary pressures.
Raised Returns Outlook Signals Confidence
In a move signaling management confidence, HSBC raised its medium-term return on tangible equity target. Group Chief Executive Georges Elhedery announced the bank is now targeting a return on tangible equity of 17% or better, excluding notable items, for each year from 2026 through 2028. This represents a significant increase in the bank’s profitability ambitions.
Additionally, the bank provided guidance for banking net interest income of at least $45 billion in 2026, reflecting expectations for continued revenue growth. The board maintained its dividend payout ratio target of 50% for the next three years, demonstrating commitment to shareholder returns. For 2025, HSBC declared a fourth interim dividend of $0.45 per share, bringing the total annual dividend to $0.75 per share.
According to Elhedery, 2025 marked “a year of decisive action and swift execution” that is reflected in the bank’s strong performance. He emphasized that all four of the bank’s business divisions performed well and that HSBC has strong momentum across its operations. The comments suggest management believes the restructuring efforts and strategic initiatives undertaken during the year have positioned the institution for enhanced profitability.
Capital Position Remains Strong
The bank’s Common Equity Tier 1 capital ratio remained stable at 14.9%, indicating a solid capital buffer that provides financial flexibility for future growth and investment opportunities. Meanwhile, credit impairments totaled $3.9 billion for the year, reflecting the bank’s provisions for potential loan losses amid global economic uncertainty.
The banking sector continues to navigate challenges including geopolitical tensions, regulatory pressures, and evolving interest rate environments. HSBC’s ability to exceed profit expectations while absorbing significant one-time charges demonstrates operational resilience in this complex landscape.
Investors and analysts will be closely monitoring whether HSBC can achieve its elevated returns targets over the coming years as the bank executes on its strategic transformation. The success of these initiatives will largely depend on global economic conditions, particularly in key Asian markets where HSBC maintains significant operations, as well as the bank’s ability to control costs while driving revenue growth.
