HSBC shares sink as impairment charge triggers 29 per cent profit hit
Europe’s biggest lender HSBC suffered a 29 per cent annual hit to profit in the second quarter of the year after a hefty impairment charge related to business in China.
The FTSE 100 juggernaut posted a $6.3bn (£4.72bn) pre-tax profit, missing analyst expectations of $6.99bn. This came as the lender recorded a $2.1bn write-down for its stake in China’s Bank of Communications.
The figure trumped previous expectations of a $1.6bn loss, following the Bank of Communication’s plans to raise up to ¥120bn (£12.5bn) by issuing new shares, which would reduce HSBC’s ownership to 16 per cent from 19 per cent.
Shares in HSBC tumbled nearly five per cent as markets opened to 925.50.
Matt Britzman, senior equity analyst at Hargreaves Lansdown, said: “Another quarter, another messy set of results for HSBC.
“Headline numbers have, once again, been skewed by one-off items, and the 29% drop in second-quarter profit before tax is a poor measure of performance.”
Britzman said underlying performance was “far more encouraging” with “pre-tax profit coming in comfortably ahead of consensus driven by strong growth in wealth management”.
Wealth performs in ‘messy quarter’
Headline revenue took a nine per cent hit, which the firm said was due to the impact of notable items from disposals in Canada and Argentina. Excluding notable items, revenue rose $1.9bn to $35.4bn. This came after a strong performance in wealth and equity markets.
The bank’s international wealth and premier banking arm rose 13.2 per cent to over $2bn as the lender continues centre focus on private credit and wealth. In London, the bank opened a new wealth centre earlier this year designed for Premier and private bank clients to meet with relationship managers on an invite-only basis and receive a stand-out, personalised wealth management service.
Operating expenses jumped four per cent year-on-year to $17bn on the back of “restructuring and other related costs associated with organisational simplification”. Chief executive Georges Elhedery has laid out ambitions to achieve $1.5bn in annualised cost savings by 2027, which has cost the bank $0.6bn so far in 2025.
The bank said saving plans remain “on track”.
HSBC maintains UK grip
In the UK, the bank recorded a bumper first-half.
Britain’s biggest lender took home $3.6bn for the first six months of the year, as its UK arm’s profit jumped over 22 per cent.
Elhedery said the bank’s loan book grew four per cent in its home market, with “signs of recovery in lending growth in commercial banking”.
HSBC’s net interest margin – a crucial metric measuring a bank’s profitability from lending – decreased by five basis points compared with the first half of 2024. The firm pointed to an “adverse impact from foreign currency translation”.
The firm’s shares were among one of the hardest hit by President Donald Trump’s ‘Liberation Day’ tariff onslaught, sinking to lows of 713.20p.
The outsized tariffs on Asia, where HSBC has significant operations compared with its FTSE 100 peers, dragged the bank into the red.
But as Trump rowed back on his aggressive trade policy, HSBC shares have rallied to a 24 per cent gain for the year-to-date. The stock has smashed an all-time high, closing at 971.60p on Tuesday.
The bank said it was “well positioned to manage the changes and uncertainties prevalent within the global environment” including tariffs.
“We have modelled a disruptive tariff scenario that includes significant reductions in policy rates,
together with broader macroeconomic deterioration.
“While we would expect the direct impact from tariffs to have a relatively modest impact on our revenue, the broader macroeconomic deterioration may see return on tangible equity, excluding notable items, fall outside of our mid-teens targeted range in future years.”