HSBC Holdings plc

On a constant-currency, year-on-year basis excluding notable items, Q2 revenue was USD 19 billion, up 7%, and profit before tax was USD 10.3 billion, up 13%; annualized ROTCE was 19.5%. For the first half, revenue and profit before tax were both up 6%, with annualized ROTCE of 19.1%. CET1 was 14.1%, up 10 bps from Q1, after supporting USD 20 billion of loan growth. Banking NII increased USD 0.8 billion year-on-year to USD 11.6 billion in Q2, and management raised full-year Banking NII guidance to at least USD 46 billion. Q2 ECL charge was USD 1.1 billion, or 41 bps annualized as a percentage of loans and advances, with full-year credit guidance reiterated at around 45 bps. Costs grew 1% year-on-year in Q2, and HSBC increased targeted organizational simplification savings from USD 1.5 billion to USD 2 billion, to be actioned by year-end. Deposits rose USD 46 billion in the quarter and loans rose USD 20 billion; the deposit base stood at USD 1.8 trillion. Management reiterated a 2026 dividend payout ratio target of 50% of earnings per ordinary share, excluding material notable items and related impacts.

Georges Elhedery framed the quarter as evidence that momentum is building across HSBC’s core franchises, especially where it has leading positions in Hong Kong, the U.K., Wealth and CIB. He emphasized disciplined growth: the bank will pursue loans and investment only at the right returns and within risk appetite, while reallocating capital away from lower-return businesses into strategic areas. His tone was confident and strategic, repeatedly stressing simplification, AI-enabled process reengineering, and the idea that HSBC is creating capacity for future growth rather than chasing growth for its own sake.

Manveen Kaur highlighted that all four businesses grew revenues and each delivered ROTCE above the group target of at least 17%, with Q2 group ROTCE at 19.5%. She pointed to Banking NII of USD 11.6 billion in Q2 and said the full-year guide was lifted to at least USD 46 billion due to stronger deposit and loan trends and a favorable rate outlook, including reinvestment of USD 50 billion of maturing structural hedge assets at 2.8% in the second half. On risk and capital, she cited a Q2 ECL charge of USD 1.1 billion, CET1 of 14.1%, 100 bps of capital generation from regulatory profits, 30 bps consumed by balance sheet growth, 50 bps accrued for dividends, and up to USD 1 billion of buybacks. She also reiterated around 1% cost growth for 2026 versus 2025 and explained that higher simplification savings and business exits create room for selective reinvestment.

Analysts focused on the balance between capital returns and reinvestment, and management said dividend accrual remains the first use of capital, followed by organic growth, with buybacks as the preferred distribution for excess capital. On NII, HSBC said the guidance to at least USD 46 billion already incorporates plausible downside from HIBOR volatility and FX, even though the run rate could mathematically support more. Questions on costs centered on whether the higher simplification savings and planned investment acceleration imply a higher cost base; management said any incremental spend should be partially offset by simplification savings and divestment-related redeployment, with modest impact from variable pay if performance bonuses are used. On asset quality, management said Hong Kong CRE looks more stable, the Middle East reserve from Q1 remains in place, and any future releases would wait for two clear quarters of stability.