HSBC Q4 Pre-Tax Earnings Increase Y/Y on Higher Revenues, Lower ECL

HSBC Holdings HSBC reported fourth-quarter 2025 pre-tax profit of $6.80 billion, which increased significantly from the prior-year quarter.

Results were primarily driven by an increase in revenues, and lower expected credit losses and other credit impairment charges (ECL). However, an increase in expenses hurt results to some extent.

HSBC’s Revenues Improve, Expenses Rise

Total revenues were $16.34 billion, up 41.5% year over year. The rise was driven by higher net interest income, net fee income and other operating income.

Total operating expenses increased 8.4% year over year to $9.33 billion. 

In the quarter under review, ECL was $901 million, down 33.8% from the prior-year quarter.

The common equity tier 1 (CET1) ratio, as of Dec. 31, 2025, was 14.9%, unchanged from Dec. 31, 2024. The leverage ratio was 5.3%, down from 5.6% as of Dec. 31, 2024.

HSBC’s Quarterly Performance by Business Lines

The Hong Kong Business: The segment reported $2.45 billion in pre-tax profit, up 13.4% from the year-ago period. The rise was driven by higher revenues.

The UK Business: The segment reported a pre-tax profit of $1.78 billion, up 18.1% from the year-ago quarter. Lower ECL charges and a rise in revenues resulted in the increase.

Corporate and Institutional Banking: Pre-tax profit was $2.48 billion, which increased 16.7% year over year. The rise was driven by lower ECL charges and higher revenues.

International Wealth and Premier Banking: Pre-tax profit was $983 million, which increased 96.2% year over year. The rise was driven by higher revenues and lower ECL charges.

Corporate Centre: The segment reported a pre-tax loss of $891 million, narrower than the loss incurred in the year-ago quarter.

HSBC’s Capital Distribution Update

The company’s board of directors approved a fourth interim dividend of 45 cents per share for 2025.

HSBC Management’s Outlook

For 2026, management expects banking net interest income (NII) of at least $45 billion.

ECL charges as a percentage of average gross loans are expected to be 40bps in 2026 (including held-for-sale loan balances). Over the medium term, the company plans to retain 30-40bps.

The company targets growth in target basis operating expenses of 1% in 2026 compared with 2025.

Management expects year-over-year growth in revenues from 2026 to 2028, rising to 5% growth in 2028 from 2027.

HSBC expects a return on average tangible equity of 17% or better for 2026, 2027 and 2028, excluding notable items.

The company intends to manage the CET1 ratio within its medium-term target of 14-14.5%.

The dividend payout ratio on a target basis is expected to be 50% in 2026, 2027 and 2028, excluding material notable items and related impacts.

The company expects to have taken action to deliver the $1.5-billion organizational simplification savings by the first half of 2026, six months ahead of plan.

HSBC’s completed and announced exits are expected to generate $0.7 billion in annualized cost savings. Exits in active execution, including activities under strategic review, are expected to generate $0.6 billion.

Following the privatization of Hang Seng Bank, reported cost synergies across HSBC and Hang Seng Bank are expected to release $0.3 billion. To reflect this, HSBC is increasing its medium-term cost reallocation commitment from $1.5 billion to $1.8 billion.

Our View on HSBC

HSBC’s strong capital position, a global network and business simplification initiatives are expected to support its financials. As part of its focus on optimizing returns, the company is divesting operations in underperforming regions and has exited retail banking across multiple markets. These moves position it for improved operating efficiency. However, higher expenses and rising ECL charges are concerning.

HSBC Holdings plc Price, Consensus and EPS Surprise

 

HSBC Holdings plc price-consensus-eps-surprise-chart | HSBC Holdings plc Quote

Currently, HSBC carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of HSBC’s Peers

Deutsche Bank DB reported fourth-quarter 2025 earnings attributable to its shareholders of €1.29 billion ($1.55 billion), which rose significantly from €106 million ($126.8 million) in the prior-year quarter.

Increased revenues and lower provisions for credit losses aided DB’s results. Notably, a decline in expenses was encouraging.

Barclays BCS reported fourth-quarter 2025 net income attributable to ordinary equity holders of £1.19 billion ($1.63 billion), up 23.8% from the prior-year quarter.

An increase in revenues and a strong balance sheet supported BCS’s results. A decrease in credit impairment charges was also encouraging. However, Barclays recorded higher operating expenses in the quarter.

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