ii view: HSBC is China recovery play with dividend attraction

Full-year results to 31 December

• Revenue flat at $65.9 billion (£50.7 billion)
• Pre-tax profit up 6.5% to $32.3 billion (£24.9 billion)
• Capital cushion, or CET1 ratio of 14.9%, up from 14.8% a year ago
• Bad debt provision flat at $3.4 billion (£2.6 billion)
• Fourth interim dividend of $0.36 per share
• Total 2024 payment of $0.87 per share, including a special payment of $0.21 per share), up from 2023’s $0.61 per share

Guidance:

• Targeting growth in 2025 operating expenses of approximately 3%
• New share buyback programme of up to £2 billion for the first quarter

Chief executive Georges Elhedery said:

"Our strong 2024 performance provides firm financial foundations upon which to build for the future, as we prioritise delivering sustainable strategic growth and the best outcomes for our customers. 

“Since becoming CEO, I have focused on simplifying how we operate and injected energy and intent into the way we deliver our strategy. Each targeted action we are taking is designed to unlock HSBC's full potential. We look to the future with confidence and clarity of purpose."

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ii round-up:

Founded in 1865 in Hong Kong and now headquartered in London, HSBC Holdings (LSE:HSBA) serves around 41 million customers across more than 50 countries and territories worldwide. 

Previously three divisions, as of 2025 the bank now operates across four divisions: 1) Hong Kong 2) the UK 3) Corporate and Institutional Banking 4) International Wealth and Premier Banking. The hope is to make a simpler and more dynamic organisation, with faster decision-making and clearer lines of accountability. 

For a round-up of these latest results announced on the 19 February, please click here.

ii view:

With a history dating back to 1865, HSBC today employs over 200,000 people. As one of the world’s largest banking and financial services organisations, its stock market value of around £151 billion stands comfortably ahead of UK headquartered rivals Barclays (LSE:BARC), NatWest Group (LSE:NWG) and Lloyds Banking Group (LSE:LLOY), each at under £45 billion. Geographically, Hong Kong accounted for most revenues in 2024 at 63%. That was followed by the UK at 22%, North America and the Middle East each at around 3%, and other countries the balance. 

For investors, trade tariffs being imposed by the US on trading partners, including China, are reverberating globally, potentially slowing worldwide economic growth and reducing loan demand. Political tensions between China and the West remain strained, hindered by China’s support for Russia and its actions in Ukraine. Cost growth of 3% for 2025 compared to 2024 is being predicted by management, while an estimated price-to-net asset value of 1.1 times compares to ratios of around 0.6 times for rivals Barclays and Deutsche Bank, suggesting potentially better value elsewhere.   

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On the upside, exposure to the world’s second-largest economy, China, via the Hong Kong business is considerable and unrivalled by other UK listed banks. The new divisional structure aims to increase efficiency and reduce costs. Bad debts remained stable at $3.4 billion year-over-year, while HSBC’s balance sheet remains robust with the capital cushion, or CET1 ratio of 14.8% sat above management’s medium-term target range of 14-14.5%.

For now, and while risks remain, a consensus analyst estimate of fair value sat above 930p per share and a forecast dividend yield of around 6% should continue to be of interest to income seekers.  

Positives: 

• Robust balance sheet
• Attractive dividend yield (not guaranteed)

Negatives:

• Uncertain economic outlook
• Heightened political tensions between the West and China

The average rating of stock market analysts:

Strong hold