HSBC, Europe’s largest lender, has revealed a 7% decline in pre-tax profits for the past year, totalling $29.9 billion. Despite this downturn, Chief Executive Georges Elhedery is optimistic about the future, asserting that his ambitious restructuring programme is nearing completion. The results, which exceeded market expectations by nearly $1 billion, come in the wake of significant one-off charges that have impacted the bank’s financial performance.
Strategic Restructuring Underway
Since taking the helm in 2024, Elhedery has been steering HSBC through a comprehensive overhaul aimed at transforming the bank into a more streamlined and agile institution. He described the objective as creating “a simple, more agile, focused bank built for a fast-changing world.” This vision has involved reorganising the bank’s operations along geographical lines, particularly focusing on the East-West dynamic, while also divesting from smaller investment banking units in the United States and Europe.
The restructuring has not been without its costs. HSBC reported $4.9 billion in one-off charges last year, which included a substantial $2.1 billion write-off linked to its investments in China’s Bank of Communications. The downturn in China’s property sector has significantly affected the financial institution, resulting in a staggering 66% drop in pre-tax profit for its mainland China operations, which now stands at $1.1 billion.
Financial Performance and Future Projections
Despite the decline, HSBC’s pre-tax profit of $29.9 billion was ahead of analysts’ forecasts and followed a particularly robust performance in 2024. The bank has raised its target for return on tangible equity to “17% or better” by 2028, up from the previously set “mid-teens” goal for the three years leading to 2027. For the past year, the return on tangible equity was reported at 13.3%.
Stock market reactions have been positive, with Hong Kong-listed shares climbing by 2.5% following the announcement of results. HSBC’s commitment to enhancing its profitability is evident, as it also plans to target $900 million in pre-tax revenue and cost synergies from its operations with subsidiary Hang Seng Bank by the end of 2028, despite incurring an estimated $600 million in restructuring costs.
Leadership Changes and Investor Sentiment
Elhedery’s leadership has led to a significant transformation within HSBC, including the removal of 11 business units globally last year. This strategic shift has had a favourable impact on the bank’s stock performance, which increased by 50% in 2025 and has continued to rise this year, pushing the market value to approximately $300 billion.
The boardroom has also seen changes, with the appointment of Brendan Nelson, a former KPMG partner, as chair in December. His arrival follows a lengthy search for a permanent executive to fill the role, during which the bank operated without a steady leadership figure at the top.
HSBC has announced a final dividend of 45 cents per share, complementing the 30 cents distributed earlier in the year. However, this total of 75 cents falls short of the 87 cents per share paid out in 2024. Elhedery’s compensation for 2025 was reported at £6.6 million, an 18% increase from the previous year, which might raise eyebrows among investors given the current economic climate.
Why it Matters
The recent results and strategic changes at HSBC are indicative of the bank’s resilience and adaptability in a rapidly evolving financial landscape. As the institution aims to streamline operations and enhance profitability, its ability to navigate challenges—such as market competition and technological advancements—will be crucial for sustaining investor confidence and ensuring long-term growth. The outcome of these strategic initiatives will not only influence HSBC’s standing in the global banking sector but also impact the broader financial ecosystem it operates within.
