Banking giant HSBC Group turns in $25b profit as restructuring makes headway

Dubai: The HSBC Group’s 2024 profit before tax rose a handsome $2 billion to $32.3 billion as the banking giant makes steady progress on an ambitious reworking of its operations and market coverage.

The bottom-line numbers featured a $4.8 billion gain from selling its business in Canada, but was offset by losses stemming from exiting its Argentina operations. That resulted in a $1 billion loss. There was also the recycling of ‘foreign currency reserve losses and other reserves of $5.2 billion’.

Share buyback

The banking entity is also planning a share buyback of up to $2 billion, which 'we expect to complete by our first quarter 2025 results announcement'. (HSBC has a sizable presence in the UAE and wider Middle East markets.)

Smaller can be better

"We are creating a simple, more agile, focused bank built on our core strengths," said Georges Elhedery, Group CEO of HSBC. "We continue to take deliberate and decisive steps.

"This includes creating four complementary, clearly differentiated businesses, aligning our structure to our strategy and reshaping our portfolio at pace and with purpose."

The 2024 profit after tax came to $25 billion, an increase by $400 million.

In the near term, HSBC is targeting $1.5 billion in savings through the ongoing re-organisation. It will mean 'de-duplication of roles' through a more simplified organisational structure and a reduction in staff expenses by around 8%.

Drop in margin

The 2024 net interest income came in lower by $3.1 billion, clearly 'reflecting the impact of business disposals and higher funding costs'. The latter stemmed from costs associated with the 'redeployment of commercial surplus to the trading book, where the related revenue is recognised in ‘net income from financial instruments held for trading or managed on a fair value basis‘.

To an extent, this was offset by higher net interest income at HSBC UK.

The net interest margin for the year ended up at 1.56%, lower by 10 basis points.

For 2024, HSBC is paying $0.87 per share as dividend, which includes a special payout of $0.21 per share.

With the restructuring set to continue, "I have put in place a smaller, core team of exceptionally talented leaders driven by a growth orientated mindset and a firm focus on dynamically managing our costs and capital," said Elhedery.

"We are embedding this approach across the organisation to ensure we are continually focused on these two important principles. Each targeted action we are taking is designed to unlock HSBC’s full potential."