HSBC set to unveil bigger profits as cost-cutting overhaul in focus
HSBC is set to unveil bigger profits as investors prepare for an update on the bank’s cost-cutting overhaul, while earnings for Lloyds will be in focus amid a long-running motor finance probe.
Rivals Barclays and NatWest set the tone for the banking sector when they reported stronger earnings this week, despite UK interest rates starting to come down.
Banks had been bolstered by a period of higher borrowing costs, allowing them to generate more from loans offered to customers.
Both lenders revealed they handed out more in bonuses to staff last year after a stronger financial performance and investment activity picking up.
HSBC, which is the UK’s largest bank, is set to publish its annual results on Wednesday.
It is expected to report a pre-tax profit of $31.7bn (£25.2 bn) for 2024, up from $30.3bn (£24.1bn) in 2023.
The bank has undergone significant change in recent months under the leadership of chief executive Georges Elhedery, who has spearheaded an overhaul of its global structure.
The changes form part of plans to drastically reduce costs and focus on more profitable parts of the business.
It includes winding down parts of its investment banking operations in the UK, Europe and the Americas, while it has also been cutting the number of top bankers working at HSBC.
The bank is reportedly preparing to reveal that annual cost savings totalled $1.5bn (£1.2bn) in 2024, after one-off costs, according to the Financial Times.
HSBC declined to comment on the reports, but investors will be keen to hear an update on the progress of the reorganisation alongside the financial results release on Wednesday.
Meanwhile, Lloyds Banking Group will also report on its yearly performance on Thursday, with the group expected to report lower earnings unlike its peers.
Its pre-tax profit is forecast to come in at £6.4bn, down from the £7.5bn generated in 2023, driven partly by lower interest rates.
But the lender’s exposure to the UK’s motor finance market will also be in sharp focus for shareholders, after revealing last year it was setting aside about £450m to cover potential costs related to a regulatory investigation.
Some analysts think this provision could be increased in the latest results, with some forecasting an additional £550m charge.
The banking group is one of the biggest motor finance providers in the UK through its brand Black Horse.
Last week, bank Close Brothers warned it expects to set aside up to £165 million in the first half of the year to cover possible legal and compensation costs related to the review into car loans commission.
Press Association – Anna Wise