HSBC Holdings plc 1Q 2024 Earnings Release

30 Apr 2024

Noel Quinn, Group Chief Executive, said:

“I’m pleased with our start to 2024. We completed the sale of our Canada business and agreed the sale of our Argentina business, both of which allow us to focus on markets with higher value international opportunities. Our good profit performance of $12.7bn in the first quarter has enabled us to continue the trend of rewarding our shareholders. We have announced a total of $8.8bn of distributions, consisting of a first interim dividend for 2024 of $0.10 per share, a special dividend of $0.21 per share from the Canada sale proceeds, and a new share buy-back of up to $3bn. Our 2024 guidance remains unchanged, including a mid-teens return on average tangible equity and continued cost discipline.“

Financial performance (1Q24 vs. 1Q23)

  • Profit before tax decreased by $0.2bn to $12.7bn. This included a $4.8bn gain following the completion of the disposal of our banking business in Canada, inclusive of fair value gains on the hedging of the sale proceeds, partly offset by a $1.1bn impairment recognised in 1Q24 following the classification of our business in Argentina as held for sale. The reduction in profit before tax also reflected the nonrecurrence of a $2.1bn reversal in 1Q23 of an impairment relating to the sale of our retail banking operations in France, which was subsequently reinstated in 4Q23 prior to completion, and a $1.5bn gain recognised in 1Q23 on the acquisition of Silicon Valley Bank UK Limited (‘SVB UK‘).
  • On a constant currency basis, profit before tax decreased by $0.3bn to $12.7bn. Reported profit after tax decreased by $0.2bn to $10.8bn.
  • Revenue increased by $0.6bn or 3% to $20.8bn, including the acquisition and disposal impacts of the strategic transactions described above. Revenue growth also reflected the impact of higher customer activity in our Wealth products in Wealth and Personal Banking (‘WPB‘), and in Equities and Securities Financing in Global Banking and Markets (‘GBM‘), which in part mitigated a reduction in Foreign Exchange revenue, compared with a strong 1Q23.
  • Net interest income (‘NII‘) of $8.7bn fell by $0.3bn, primarily reflecting deposit migration. Non-interest income increased by $0.9bn, reflecting a rise in trading income of $1.3bn, mainly in GBM. The associated funding costs reported in NII grew by $1.3bn. In addition, fee income grew by 5%. On a constant currency basis, revenue rose by 3% to $20.8bn.
  • Net interest margin (‘NIM’) of 1.63% decreased by 6 basis points (‘bps‘) compared with 1Q23. NIM increased by 11bps compared with 4Q23, reflecting the impact of hyperinflation and currency devaluation in Argentina, partly offset by higher funding costs of liabilities.
  • ECL of $0.7bn were $0.3bn higher than in 1Q23. The 1Q24 charge primarily comprised stage 3 charges in both WPB and our wholesale businesses, while the 1Q23 charge reflected a favourable change in economic assumptions and lower stage 3 charges. Annualised ECL as a percentage of gross loans and advances to customers was 30bps in 1Q24, including held for sale balances.
  • Operating expenses of $8.2bn were $0.6bn or 7% higher than in 1Q23. The growth was primarily due to continued investment in technology, the impacts of inflation and a higher performance-related pay accrual which reflected a change in the expected quarterly phasing of the performance-related pay pool relative to 1Q23. While target basis operating expenses rose by 7%, we are reconfirming our cost growth guidance of approximately 5% for 2024 compared with 2023 on this basis. Target basis operating expenses are measured on a constant currency basis, excluding notable items, the impact of retranslating the results of hyperinflationary economies at constant currency, and the direct costs from the sales of our France retail banking operations and our banking business in Canada.
  • Customer lending balances decreased by $5bn compared with 4Q23. On a constant currency basis, lending balances increased by $5bn, including growth in Commercial Banking (‘CMB‘) and GBM, notably in HSBC Bank plc, while mortgage balances increased in WPB in HSBC UK.
  • Customer accounts decreased by $41bn compared with 4Q23. On a constant currency basis, customer accounts fell by $24bn, mainly in our legal entity in Hong Kong, notably reflecting the impact of customer deleveraging and competitive pressures in CMB and GBM, and outflows into wealth products in WPB.
  • Common equity tier 1 (‘CET1’) capital ratio of 15.2% increased by 0.4 percentage points compared with 4Q23, driven by capital generation, the net beneficial impact of strategic transactions on CET1 and risk-weighted assets (‘RWAs‘), partly offset by the foreseeable dividend accrual, including the special dividend of $0.21 per share following the completion of the sale of our banking business in Canada, and the share buy-back announced at our 2023 year-end results.
  • The Board has approved a first interim dividend of $0.10 per share. In addition, following the completion of the sale of our banking business in Canada, the Board has approved a special dividend of $0.21 per share, payable in June 2024, alongside the first interim dividend. After completing the $2bn buy-back announced at our full year 2023 results, we now intend to initiate a share buy-back of up to $3bn, which we expect to have a 0.4 percentage point impact on the CET1 capital ratio. We plan for this buy-back to commence shortly after the annual general meeting (‘AGM‘) in May 2024.

Outlook

  • Our guidance remains unchanged from that set out at our full-year results on 21 February 2024. We continue to target a return on average tangible equity (‘RoTE‘), excluding the impact of notable items, in the mid-teens for 2024, with banking net interest income (‘banking NII‘) of at least $41bn, dependent on the path of interest rates globally. We are reconfirming our cost growth guidance of approximately 5% for 2024 compared with 2023, on a target basis, and ECL charges as a percentage of average gross loans of around 40bps in 2024.
  • Our guidance reflects our current outlook for the global macroeconomic environment, including customer and financial markets activity. This includes our modelling of a number of market dependent factors, such as market-implied interest rates (as of early April 2024), as well as customer behaviour and activity levels.
  • We intend to manage our CET1 capital ratio within our medium-term target range of 14% to 14.5%, with a dividend payout ratio target of 50% for 2024, excluding material notable items and related impacts.

Note: we do not reconcile our forward guidance on RoTE excluding notable items, target basis operating expense, dividend payout ratio excluding material notable items and related impacts or banking NII to their reported equivalent measures.

For further information contact:

Investor Relations

UK – Neil Sankoff
Telephone: +44 (0) 20 7991 5072
Email: investorrelations@hsbc.com

Hong Kong – Yafei Tian
Telephone: +852 2899 8909
Email: investorrelations@hsbc.com.hk

Media Relations

UK – Gillian James
Telephone: +44 (0)7584 404 238
Email: pressoffice@hsbc.com

UK – Kirsten Smart
Telephone: +44 (0)7725 733 311
Email: pressoffice@hsbc.com

Hong Kong – Aman Ullah
Telephone: +852 3941 1120
Email: aspmediarelations@hsbc.com.hk

Read the full media release: HSBC Holdings plc 1Q 2024 Earnings Release (PDF 1MB)

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