HSBC shares flatlined on Wednesday after the FTSE 100 banking giant released Q4 and full-year results that were largely ahead of expectations.
Although some investors may be disappointed the stock didn’t have more of a positive reaction, there will be a degree of satisfaction with the results and the performance of HSBC shares going into results.
“HSBC delivered a 9% beat on the profit line, driven by booming wealth management and non-interest income, while focusing on streamlining its operations with $3 billion in cost savings on the cards. There was a slight disappointment in impairments, which are higher than expected, signalling a potential shift from HSBC’s historically market-leading credit quality – a trend worth keeping an eye on,” said Matt Britzman, senior equity analyst, Hargreaves Lansdown.
Guidance has been all-important so far in the current round of banking earnings with Barclays and NatWest shares falling on the day of their releases. There was a risk that any disappointment around HSBC’s outlook could see them go the same as their peers, given the sharp run-up HSBC shares have had going into results.
However, HSBC’s strong performance across the board and comparatively upbeat outlook assessment played a major part in supporting the shares on Wednesday.
HSBC said they expect $42bn of banking net interest income in 2025 and saw returns on tangible equity in the mid-teens through 2027.
“Guidance for the new year is ahead of expectations, but much of the positive outlook was already priced in given the improved US rate environment and expected cost management efforts.”
The wealth management business is firing on cylinders, which is central to HSBC’s strong performance. The company added 800,00 new wealth clients in Hong Kong, and the wealth business unit generated $12.2bn in profit before tax.
Of the $2bn increase in group operating profit, the wealth unit contributed around $550m.
“Momentum in the wealth businesses looks particularly notable,” said Alex Potter, investment director at abrdn.
Potter continued to explain that although HSBC’s results lacked any major excitement, the strategic decisions by the bank put it on good footing for long-term shareholder returns.
“The new CEO’s big strategic update looks sensible, if unspectacular, with another $1.5bn of explicit cost savings. Some more aggressive recent commentary had been talking about as much as $3bn of savings, so some may be disappointed today. However, the new return targets out to 2027 are admirable, a little above expectations and the yield looks very well underpinned, in our view.”
HSBC announced a fresh $2bn share buyback to bring total returns to shareholders $26.9bn.