HSBC lifts earnings target, annual profit dips but beats estimates

By Selena Li and Lawrence White

HONG KONG, Feb 25 (Reuters) - HSBC Holdings lifted a key earnings target after its annual profit beat expectations, a decision which reflects that most of the bank's planned overhaul has now been completed and further growth is in its sights.

Buffeted by $4.9 billion in one-off charges, Europe's largest lender's pretax profit slipped 7% to $29.9 billion last year. That was, however, about $1 billion ahead of a consensus forecast and comes after an unusually strong 2024.

Chief Executive Georges Elhedery said in a statement that the bank had acted decisively last year.

"We are becoming a simple, more agile, focused bank built for a fast-changing world."

HSBC said it was raising its target for return on tangible equity, a key measure of profitability for banks, to "17% or better" through 2028, up from its "mid-teens" target set for the three years through 2027. Last year, it came in at 13.3%.

The bank's Hong Kong-listed shares rose 2.5% after the results. 

A RAFT OF ONE-OFF CHARGES

Charges incurred last year included a $2.1 billion write-off related to its holdings in China's Bank of Communications which had been hurt by dilution and the long downturn in China's property sector.

That led to pretax profit for its mainland China business tumbling 66% to $1.1 billion.

The bank also logged legal provisions worth $1.4 billion as well as $1 billion of restructuring and related costs.

    Elhedery, a career HSBC veteran, has shaken up the bank since assuming the chief executive role one and a half years ago by reorganising operating divisions along East-West lines, shedding sub-scale investment banking units in the U.S. and Europe, and slashing the ranks of senior managers. 

All in all, the bank initiated 11 exits from various businesses across the globe last year.

Those efforts helped the bank's London-listed stock surge 50% in 2025 and it has climbed another 10% for the year to date to give the bank a market value of some $300 billion.

HANG SENG SYNERGIES AND COSTS

HSBC took subsidiary Hang Seng Bank private in a $13.7 billion deal last year. It said on Wednesday that their combined banking operations would target $900 million in pretax revenue and cost synergies by the end of 2028, but there would also be some $600 million restructuring costs.

The bank also said it would pay a final dividend of 45 cents a share, adding to 30 cents granted earlier in the year. That was, however, below the 87 cents paid in total for 2024.

Elhedery received 6.6 million pounds ($8.9 million) in total remuneration in 2025, up 18% from a year earlier.

    Analysts at Jefferies said investors were likely to welcome the strong results but may question its forecast of just a 1% rise in costs for 2026 given the competitive environment and need to invest in AI technology.

($1 = 0.7395 pounds)

(Reporting by Selena Li in Hong Kong and Lawrence White in London; Editing by Edwina Gibbs)