HSBC Reports Significant First-Half Profit Drop Amid Economic Challenges
HSBC reports a decrease in pre-tax net income to $15.8 billion during the first half of the year
HSBC, one of the world's largest banking and financial services organisations, has announced a pre-tax profit decline of over 26% in the first half of 2025, amounting to $15.8 billion. This drop was primarily due to the recognition of a $2.1 billion impairment loss related to its stake in China's Bank of Communications (BoCom) and the absence of $3.6 billion in net gains from disposals recorded in the first half of 2024, including its Canadian and Argentinian banking businesses.
Despite these significant one-time impairments and non-recurrence of past gains, HSBC reported that its constant currency profit before tax, excluding these notable items, actually increased by $0.9 billion to $18.9 billion. This growth was boosted by strong performances in its International Wealth and Premier Banking segment, the Hong Kong business, and foreign exchange and debt and equity markets.
However, higher expected credit losses (ECL) of $1.9 billion—up $0.9 billion from 2024—partly offset this growth, especially related to the Hong Kong real estate sector amid more challenging economic conditions and geopolitical tensions, including higher trade tariffs. Operating expenses also rose by 3%, mainly due to greater investment in technology and inflationary pressures.
Georges Elhedery, HSBC's chief executive, acknowledged the heightened uncertainty and a deteriorating economic outlook partly driven by geopolitical tensions and increased trade tariffs, which contributed to the elevated credit impairment allowances and influenced cautious lending expectations for 2025. While no direct quantification of US tariff effects on profits was given, the bank’s mention of tariffs in the context of credit risk and economic challenges suggests indirect pressure on its Asian markets and credit portfolios.
Market reaction to the results was negative, with HSBC's stock falling over 4% after the release. Despite the profit declines, HSBC approved a second interim dividend of $0.10 per share (yielding 5.16%) and announced a $3 billion share buyback program to be completed by Q3 2025, reflecting confidence in its longer-term strategy execution.
In a positive note, each of HSBC's four businesses sustained growth in earnings and revenue in the first half of 2025. The bank's primary revenue source remains Asia, and HSBC has been focusing on developing its wealth business and targeting fast-growing markets in Asia. Elhedery stated that the bank is "well positioned" to deal with the effects of U.S. tariffs and is making positive progress in its structural shakeup and cost-cutting, which began in October.
Despite the challenging economic environment, HSBC remains optimistic about its future prospects. However, Elhedery also mentioned that the broader macroeconomic deterioration may cause the bank's return on tangible equity to fall outside of the mid-teens targeted range in future years.
In summary, HSBC’s first-half 2025 profit drop reflected significant one-time impairments and non-recurrence of past gains, offset partly by underlying business momentum. The US tariffs and related geopolitical tensions contributed to increased credit risks and a cautious economic outlook impacting the bank’s performance in core Asian markets. Despite these challenges, HSBC remains confident in its ability to navigate through these uncertain times and deliver long-term value to its shareholders.
The significant drop in HSBC's first-half profits in 2025, despite a growth in its International Wealth and Premier Banking segment and foreign exchange markets, was primarily due to one-time impairments and non-recurrence of past gains, as well as higher expected credit losses in the Hong Kong real estate sector and increased operational expenses.
HSBC's confidence in its ability to deliver long-term value to its shareholders is evident in its announcement of a second interim dividend and a $3 billion share buyback program, despite the challenging economic environment and potential impacts of US tariffs on its Asian markets.
