HSBC shares slump after profit beats expectations

HSBC has exceeded analyst profit predictions in its annual results, as the new CEO emphasises a commitment to cost-cutting.

The FTSE 100 bank released its first set of results under the leadership of Georges Elhedery this morning, covering Q4 and the full year of 2024, as reported by City AM.

Shares in the banking giant initially rose by one per cent following market open, but quickly fell into negative territory. The stock price dropped to 889.7p early on Wednesday morning.

For Q4, it reported a pre-tax profit of $2.3bn (£1.8bn), and the bank posted a pre-tax profit of $32.3bn (£25.6bn) for 2024, an increase from $30.3bn (£24bn) in 2023.

Operating expenses increased by $1bn (£800m), with the bank attributing this rise to greater technology investment and the impact of inflation.

Since taking up his position in September 2024, Elhedery has announced a cost overhaul, which involved dividing the bank into four new divisions.

HSBC reported a decrease of $3.1bn (£2.5bn) in net interest income, which the bank said was due to the effects of business disposals and higher funding costs from transferring commercial surplus to the trading book.

It also announced a $2bn (£1.6bn) share buy-back, following on from $9bn (£7bn) which began in 2024. Total shareholder return for the year was over 30 per cent, following the bank repurchasing 11 per cent of the issued share count since 2023.

Similarly, the bank's net interest margin reduced by 10 basis points to 1.56 per cent.

The bank has projected its net interest income to be approximately $42bn (£33bn) in 2025, considering "a number of market-dependent factors."

Gary Greenwood from Shore Capital stated: "The final dividend was slightly better than expected while a further $2bn buyback was in line."

He added, "Overall, there is probably more for the market to like than not here, but the shares are now trading close to a 20 year high and look increasingly up with events."

Richard Hunter, Head of Markets at interactive investor, commented: "These are not results to shoot the lights out, but the areas in which HSBC is showing particular strength are those which will receive special attention following the group's new refocus."

He continued, "Changing horses midstream is never an easy task, and the previously announced transformation will have upfront costs which will delay the benefits of the anticipated savings."

He also noted, "On the other hand, the rationale for a more focused operation is clear and should allow the group to reap the rewards of a higher focus on profit generation, while also keeping costs in check."

He concluded by saying: "Overall, these are comforting numbers which leave HSBC a strong springboard on which to build as the business is reorganised."

The bank remains committed to cost-cutting, with Elhedery's cost-cutting initiative set to continue as it maintains a group-wide focus on cost discipline.

The bank anticipates cost reductions of $0.3 billion (£238 million) in 2025 and an annualised decrease of $1.5 billion (£1.2 billion) by the end of 2026. CEO Elhedery commented on the results, stating: "Since becoming CEO, I have focused on simplifying how we operate and injected energy and intent into the way we deliver our strategy."

He continued: "I have established a smaller, core team of exceptionally talented leaders driven by a growth-oriented mindset and a firm focus on dynamically managing our costs and capital.

"We are embedding this approach across the organisation to ensure we are continually focused on these two important principles.

"Each targeted action we are taking is designed to unlock HSBC's full potential.