LONDON: HSBC Holdings plc reported a 23% jump in first-half profit to $19.5 billion on Tuesday, beating analyst expectations and prompting the bank to resume share buybacks with a $1 billion programme as Chief Executive Georges Elhedery declared the lender “capable of achieving more.”
Europe’s largest bank by market capitalisation posted profit before tax of $19.52 billion for the six months ended June 30, up from $15.81 billion a year earlier, according to results released Aug. 4. The figure surpassed the $18.9 billion average of broker estimates compiled by the company.
Revenue rose 11% to $37.7 billion, driven by growth in banking net interest income and higher fee income, particularly in wealth management and wholesale transaction banking. Profit after tax increased 23% to $15.3 billion.
The results extend a run of outperformance that has driven HSBC shares to record levels. Second-quarter profit before tax surged 60% to $10.1 billion, beating the $9.51 billion consensus estimate.
“HSBC is becoming the stronger bank we set out to build,” Elhedery said in the earnings statement. “We are executing our strategic priorities with pace, precision and discipline. This is allowing our four businesses to focus on their core strengths, grow, work together more effectively and deepen customer relationships. The result is a bank capable of achieving more.”
Shareholder returns resume
The board approved a second interim dividend of $0.10 per share and initiated a buyback of up to $1 billion, which the bank expects to complete before its third-quarter results announcement. The buyback marks a resumption of the programme, paused three quarters ago following the announcement of the Hang Seng Bank privatisation.
The common equity tier 1 capital ratio, a key measure of financial strength, stood at 14.1%, down 0.8 percentage points from Dec. 31 due to the Hang Seng Bank privatisation, dividends and increased risk-weighted assets. The ratio remains within the bank’s medium-term target range of 14% to 14.5%.
Strong income growth offsets higher costs
Net interest income increased by $1.4 billion compared with the first half of 2025, primarily driven by deposit balance growth and the reinvestment of the structural hedge at higher yields. Banking net interest income, which excludes trading book funding costs, rose by $1.6 billion to $22.9 billion.
Net interest margin of 1.61% was 4 basis points higher year-on-year, mainly due to foreign currency translation differences and the structural hedge benefit, partly offset by lower market interest rates.
Wealth fee and other income showed strong growth in the International Wealth and Premier Banking and Hong Kong business segments, supported by higher customer activity. Wholesale Transaction Banking grew 4% on a constant currency basis, while wealth revenues rose 18%.
The half-year results included notable items including disposal losses of $0.3 billion related to the planned sale of the Malta business and restructuring costs of $0.3 billion associated with the bank’s organisational simplification. In the first half of 2025, notable items included $2.1 billion of dilution and impairment losses related to the Bank of Communications associate.
Expected credit losses rose to $2.4 billion, up $0.4 billion from the prior year, reflecting stage 3 charges on wholesale exposures including a $0.4 billion fraud-related securitisation exposure in the UK and $0.2 billion related to the Hong Kong commercial real estate sector. The charge also included allowances for uncertainty due to the ongoing conflict in the Middle East.
Operating expenses of $17.4 billion were 2% higher than the first half of 2025, driven by planned technology investment and inflation, partly offset by cost reductions from the organisational simplification.
Balance sheet growth
Customer lending balances increased by $34 billion compared with Dec. 31, with constant currency growth of $40 billion reflecting expansion across all business segments, particularly in Hong Kong. Customer accounts rose by $41 billion, or $56 billion on a constant currency basis, primarily reflecting growth in the Corporate and Institutional Banking business.
Annualised return on average tangible equity was 18.2%, or 19.1% excluding notable items.
Outlook maintained
HSBC raised its banking net interest income guidance to at least $46 billion for 2026, up from previous guidance of “around $46 billion,” reflecting a more favourable interest rate outlook while acknowledging persistent volatility.
The bank reiterated its target of 17% or better return on tangible equity for 2026, 2027 and 2028, excluding notable items, and continues to target year-on-year revenue growth rising to 5% by 2028.
The expected credit loss charge as a percentage of average gross customer loans remains around 45 basis points for 2026, reflecting ongoing macroeconomic uncertainty, with a medium-term planning range of 30-40 basis points.
“HSBC creates greater value when more of our capabilities work together for our customers,” Elhedery said in a letter to shareholders. “My first two years have been about building a stronger HSBC. The next phase is about putting more of those strengths to work.”
