HSBC's Q4 Pre-Tax Earnings Jump, $1.5B Cost-Savings Plan Revealed

Core Viewpoint - HSBC Holdings reported a significant increase in pre-tax profit for Q4 2024, reaching $2.23 billion, compared to $977 million in the same quarter last year [1] Financial Performance - Total revenues for HSBC were $11.56 billion, reflecting an 11.2% decrease year over year, primarily due to lower other operating income [3] - Operating expenses slightly declined to $8.6 billion [3] - Expected credit losses (ECL) amounted to $1.36 billion, marking a 32.1% increase year over year [3] Business Segment Performance - Wealth and Personal Banking segment reported a pre-tax profit of $2.5 billion, a substantial increase from $175 million in the previous year, driven by higher total operating income [4] - Commercial Banking segment's pre-tax profit was $2.4 billion, down 3.9% from the prior year due to higher ECL charges and increased expenses [4] - Global Banking and Markets saw a pre-tax profit of $1.4 billion, up 37.4% year over year, attributed to higher total operating income [5] - Corporate Centre reported a pre-tax loss of $4 billion, compared to a $2.7 billion loss in the same quarter last year [5] Future Outlook - For 2025, HSBC anticipates banking net interest income (NII) of $42 billion and targets a 3% year-over-year growth in operating expenses [6] - The company expects to incur $1.8 billion in expenses related to business overhaul by the end of 2026, which is projected to yield annualized cost savings of $1.5 billion by the end of next year [6] - ECL charges are expected to be between 30 and 40 basis points as a percentage of average gross loans for 2025 [6] Capital Management - HSBC aims for a return on average tangible equity in the mid-teens from 2025 to 2027, excluding notable items [7] - The company plans to maintain its common equity tier 1 (CET1) ratio within a medium-term target of 14-14.5% [7] - A dividend payout ratio of 50% is expected for 2025, along with a share buyback program of up to $2 billion, likely to be completed by the end of April [7] Competitive Landscape - Competitors like Barclays and UBS reported improved financial results in Q4 2024, driven by increased revenues and lower operating expenses, although they also faced rising credit impairment charges [9][10]