HSBC Holdings plc Net Income Declines 29% in Q2 2025

In the second quarter of 2025 (2Q25), HSBC Holdings plc reported a significant decrease in financial performance. Revenue for the period was $16.5 billion, a decrease of 0.6% compared to 2Q24. Net income for the quarter stood at $4.9 billion, representing a substantial decline of 29% from the prior year's second quarter. The decrease in profit before tax was primarily attributed to dilution and impairment losses related to the Bank of Communications Co., Limited (BoCom).

Key Business Drivers and Segment Performance

The reported reduction in revenue for 2Q25 included the impact of notable items. However, excluding these items, revenue showed an increase, primarily driven by growth in fee and other income within the Wealth business in International Wealth and Premier Banking (IWPB) and Hong Kong segments. This growth was supported by higher customer activity, as well as strong performance in Foreign Exchange and Debt and Equity Markets due to volatile market conditions.

Expected Credit Losses and Operating Expenses

Expected Credit Losses (ECL) in 2Q25 were $1.1 billion, an increase of $0.7 billion compared to 2Q24. This rise included charges related to the Hong Kong commercial real estate sector, reflecting model updates for ECL calculations and increased allowances for new defaulted exposures. Operating expenses for the quarter rose by $0.8 billion, or 10%, to $8.9 billion, largely due to restructuring and other costs associated with organizational simplification, as well as increased investment in technology. These increases were partially offset by cost reductions from the disposal of the business in Argentina.

Management Outlook and Strategic Direction

Management continues to target a mid-teens Return on Average Tangible Equity (RoTE) for each of the three years from 2025 to 2027, excluding notable items. The Group expects banking Net Interest Income (NII) to be around $42 billion in 2025. ECL charges as a percentage of average gross loans are now anticipated to be around 40 basis points in 2025, reflecting persistent challenges in the Hong Kong commercial real estate sector. The Group remains on track to meet its cost target, with target basis operating expenses in 2025 expected to grow approximately 3% compared to 2024. While lending demand is expected to remain muted in 2025, mid-single digit percentage growth for year-on-year customer lending balances is projected over the medium to long term. Double-digit percentage average annual growth in fee and other income in Wealth is also expected over the medium term.