Release Date: October 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- HSBC Holdings PLC (HSBC, Financial) reported a strong quarter with a Profit Before Tax of $8.5 billion, up 11% from the previous year.
- Revenue increased to $17 billion, reflecting a $1.1 billion rise from the same quarter last year, driven by strong performance in equities and global debt markets.
- The company announced a further $4.8 billion in distributions, including a third interim dividend and a new share buyback program.
- HSBC Holdings PLC (HSBC) is undergoing a reorganization to simplify its structure, expected to result in net cost savings.
- The bank's Wealth business showed significant growth, with a 32% increase in fee and other income year-on-year, particularly driven by strong performance in Asia.
Negative Points
- Banking Net Interest Income (NII) decreased by $0.3 billion from the second quarter, primarily due to a loss from the early redemption of legacy securities.
- The ECL charge for the third quarter was $1 billion, higher than anticipated, with significant contributions from Hong Kong and the UK.
- Loan balances remained stable, indicating subdued growth in lending activities.
- The reorganization involves upfront costs, although details on the exact figures and payback period will be provided later.
- There is uncertainty regarding the impact of Argentina's contribution to Banking NII, given the volatility created by hyperinflation accounting.
Q & A Highlights
Q: Can you provide insights on HSBC's strategy regarding Mexico and the potential for continued double-digit growth in Asian wealth?
A: Georges Elhedery, Group Chief Executive, stated that HSBC has a strong market position in Mexico, particularly in wholesale banking, which is strategically connected to North America and Asia Pacific. The retail business in Mexico will be part of the new International Wealth and Personal Banking segment. Jonathan Bingham, Interim Group Chief Financial Officer, noted that HSBC's investments in Wealth capabilities, especially in Asia, have led to significant growth, and while high single-digit growth was initially projected, outperforming that in the short term is possible.
Q: What are HSBC's ambitions regarding restructuring and its impact on costs and RWAs?
A: Georges Elhedery explained that the reorganization aims to create a simpler, more agile bank, empowering frontline staff and improving customer service. Cost savings will result from deduplicating senior roles, with benefits exceeding upfront costs. Jonathan Bingham added that the clean run rate for Banking NII is stable, and while HSBC doesn't provide specific 2025 guidance, factors like rate reductions, structural hedge tailwinds, and volume growth will influence future performance.
Q: Can you explain the disconnect between strong revenue numbers in the wealth business and net new invested assets in Asia? Also, what is the outlook for corporate loan growth in Asia?
A: Georges Elhedery highlighted that strong trading activities and measures in China have driven wealth business growth. The outlook for corporate loan growth in Asia is positive, supported by policy measures in China and Hong Kong, and expected rate reductions. Jonathan Bingham added that net new invested assets in Asia grew significantly, and corporate loan growth outside Hong Kong remains resilient.
Q: What is the future outlook for transaction banking income, considering potential rate cuts and FX volatility?
A: Jonathan Bingham noted that Wholesale Transaction Banking grew by 7%, driven by client activity around FX and rates volatility. HSBC continues to invest in global trade solutions and payment solutions, expecting these areas to be platforms for future growth.
Q: How does the reorganization impact the combination of commercial banking and GBM, and what is the outlook for ECL charges?
A: Georges Elhedery stated that the reorganization simplifies HSBC's operations, merging commercial banking with global banking and markets outside the UK and Hong Kong to provide seamless services. Jonathan Bingham explained that the $1 billion ECL charge in Q3 is more normal, with specific charges in Hong Kong and Mexico, and HSBC remains within its 30-40 basis points planning range for ECLs.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
