Core Viewpoints - After excluding the significant impact of the impairment from the Bank of Communications, HSBC's Q2 revenue and profit significantly exceeded expectations, indicating a robust underlying trend [1][2][17] - The impairment is a one-time disturbance and will not affect dividend amounts or capital [1][4][17] Financial Performance - HSBC's Q2 2025 revenue, after excluding significant items, was $17.657 billion, a year-on-year increase of 5.7%, surpassing market expectations [1][3] - The net profit after tax for Q2 2025 was $7.707 billion, reflecting a year-on-year growth of 9.8%, also exceeding market consensus [1][3][4] - The non-performing loan ratio decreased by 5 basis points to 2.41% in Q2 2025 [1] Income Breakdown - Net interest income was $10.714 billion, a year-on-year decline of 2%, but the decline is narrowing and exceeded market expectations [3][9] - Non-interest income continued to grow strongly, with a year-on-year increase of 20%, surpassing market expectations by 12 percentage points [3][8] - Wealth management and transaction banking non-interest income grew by 23% and 6% respectively [3][8] Cost Management - Credit costs slightly increased but remain manageable, with a guidance adjustment to 40 basis points due to pressures in Hong Kong's commercial real estate [4][13] - Operating costs were controlled effectively, with a year-on-year increase of 1.9% after excluding significant items, which is lower than revenue growth [4][15] Future Outlook - HSBC maintains its guidance for 2025 net interest income at $42 billion, with expectations for stable loan growth and limited impact from Hibor fluctuations [5][9] - The bank's return on tangible equity (ROTE) is expected to remain around 15%, supported by strong non-interest income and effective cost management [6][17] - The bank plans to continue its strategy of divesting non-core businesses to enhance focus on global transaction banking and wealth management [15][17] Dividend and Share Buyback - HSBC declared a dividend of $0.10 per share for Q2 2025, with a total cash return of $0.22 per share [1][6] - The bank announced a $3 billion share buyback, maintaining its commitment to shareholder returns [6][16] Strategic Positioning - HSBC is positioned as a key beneficiary of the restructuring of international supply chains and the global allocation of wealth by affluent Asian residents [1][18] - The bank's strong ROTE and high dividend yield present significant investment value [1][18]

Investment Rating - The report maintains an "Accumulate" rating for the company with a target price of HKD 137.46 [8] Core Views - The company demonstrates growth potential, stable operational capabilities, and excellent shareholder returns, supported by its extensive network and licensing advantages in emerging markets [16][19] - The restructuring of global supply chains and the rising demand for cross-border wealth management are expected to provide significant growth opportunities for the company's transaction banking and wealth management businesses [4][18] Summary by Sections Investment Highlights - The company has a strong presence in emerging markets, with over 75% of its global branches overlapping with "Belt and Road" markets, enhancing its cross-border business foundation [16][19] - The company has shifted its operational strategy since 2015, reducing loan exposure and focusing on lower-risk sectors, resulting in a robust asset quality with a local real estate exposure of less than 1% of total loans [4][19] Business Growth Drivers - The demand for cross-border asset allocation is increasing, with the company positioned to benefit from the growth of wealth management in high-growth centers like Hong Kong, Singapore, and the UAE [3][18] - The company reported a 28% year-on-year increase in wealth management income in Q1 2025, with a significant inflow of new affluent clients [3][18] Financial Projections - The forecasted net profit for the company is USD 3.83 billion in 2025, with a projected compound annual growth rate (CAGR) of double digits for wealth management income from 2025 to 2029 [5][18] - The company aims for a target price-to-book (PB) ratio of 0.85 for 2025, with a target price of HKD 137.46, reflecting its growth potential despite short-term interest margin fluctuations [5][8] Risk Management - The company has effectively managed its existing risks, with a non-performing loan ratio projected to remain stable around 2.13% in the coming years [7][19] - The company’s diversified global network is expected to mitigate the impact of tariff uncertainties on its cross-border business [17][33]