HSBC annual pre-tax profit drops over 7%, revenue jumps as bank's results top estimates

Europe's largest lender HSBC on Wednesday reported annual pre-tax profit of $29.91 billion, beating estimates despite a 7.4% year-on-year decline, driven by strong performance in its wealth division and Hong Kong businesses. While profit fell, the bank's revenue gained 4% year-on-year to $68.27 billion, exceeding analyst expectations of $67.36 billion. In the fourth quarter alone, profit before tax rose significantly to $6.8 billion, up from $4.5 billion in the same period last year, largely due to favorable one-off items related to business disposals. The bank's quarterly revenue jumped 42% year-on-year to $16.4 billion, though operating expenses increased 8% to $9.3 billion, reflecting restructuring costs, technology investments, and higher performance-related compensation. HSBC Group CEO Georges Elhedery characterized 2024 as a year of "decisive action and swift execution," with all four of the bank's business segments performing well and building momentum. Looking ahead, the lender has set an ambitious target to achieve a return on average tangible equity of 17% or more, excluding notable items, between 2026 and 2028. These results come shortly after HSBC completed the privatization of Hang Seng Bank on January 26, which the bank has stated will add to its earnings and represents a better use of capital than buybacks. The bank plans to preserve Hang Seng's brand while investing to strengthen its capabilities, with Morningstar analyst Kathy Chan noting that revenue and cost synergies between the two brands are expected to gradually materialize in the medium term. In a move toward a more performance-driven compensation model similar to its Wall Street peers, HSBC is reportedly set to award minimal or no bonuses to some bankers, particularly in investment banking and wealth management. The bank intends to use the upcoming bonus round to push out underperformers, potentially including managing directors. While HSBC has not confirmed final decisions on culling underperformers, Morningstar's Chan indicated she would not be surprised to see further headcount reductions given the bank's broader goals to improve operational efficiency and deliver cost savings. Despite the positive financial results, Hong Kong-listed shares of HSBC declined by 0.46% following the announcement.