Core Viewpoint - UBS reported that HSBC Holdings (00005) announced a pre-tax profit of $15.81 billion for the first half of the year, a year-on-year decline of 26.7% [1] Group 1: Financial Performance - HSBC's pre-tax profit excluding significant items for Q2 was $9.162 billion, exceeding the company's expectations by 10% [1] - Revenue increased by 5%, with net interest income (NII) up by 2% and fee-based and other income rising by 11% [1] - Operating expenses met expectations, and pre-provision profit grew by 10% [1] - Impairment losses were 12% higher than market expectations, particularly due to $400 million in expenses related to Hong Kong commercial real estate (CRE) [1] - Loans and deposits grew by 3% to 4% quarter-on-quarter, supported by a strong British pound [1] Group 2: Capital and Dividends - The Common Equity Tier 1 (CET1) capital ratio stood at 14.6%, in line with expectations [1] - A stock buyback plan of $3 billion (1.1% of market value) was announced, compared to UBS's estimate of $2.5 billion and market consensus of $2.75 billion [1] - The dividend per share was set at $0.10, meeting expectations [1] Group 3: Future Guidance - UBS maintained its guidance for HSBC for FY2025, with net interest income expected at $42 billion, in line with market consensus [2] - Target cost growth is projected at 3%, approximately $33.3 billion, also matching market consensus [2] - Loan losses are anticipated at around 40 basis points, consistent with market consensus [2] - Average return on tangible equity (ROTE) is expected to be in the mid-teens for FY2025, FY2026, and FY2027, with market consensus at 15.5%, 15%, and 15.5% respectively [2] - The CET1 capital ratio is expected to remain between 14% and 14.5% in the medium term [2] Group 4: Market Sentiment and Valuation - Concerns were raised by investors regarding credit provisions for Hong Kong real estate and HSBC's ability to maintain its net interest income guidance for FY2025 [3] - Despite higher loan loss expectations, the outlook for non-interest income in Hong Kong was positive, showing a 22% increase or $182 million [3] - HSBC's current valuation is estimated at a price-to-earnings ratio of 9.5 times for FY2026, compared to Standard Chartered's 8.8 times, with a dividend yield of 5% and a tangible asset ratio of 1.4 times [3]