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Delving Beyond HSBC's Q1 Earnings: Should You Buy the Stock?
Swayta Shah
7 min read

In This Article:

HSBC Holdings HSBC reported first-quarter 2025 results last week. Results benefited from higher adjusted revenues and relatively stable operating expenses. On the other hand, heightened uncertainty and weakness in the economic outlook owing to geopolitical tensions and higher trade tariffs led to a rise in expected credit losses and other credit impairment charges (ECL).

So now the question is, should investors think of buying HSBC stock at the moment? Let’s address this question by evaluating the company’s latest quarterly performance and long-term prospects.

Sneak Peek Into HSBC’s Q1 Performance

Adjusted Revenues Offer Support: Revenues (excluding notable items of $3.7 billion related to the disposals in Canadian and Argentine businesses last year) grew 7% year over year to $17.7 billion. The growth reflected higher fee and other income in the Wealth division. Further, adjusted net interest income (NII) increased on the back of lower funding costs.

Operating Expenses Reflect Impact of Business Restructuring: HSBC is taking a disciplined approach to cost management. As such, the first-quarter operating expenses were relatively stable at $8.1 billion. The completion of disposals in Canada and Argentina and a favorable impact from foreign currency translation were offset by restructuring and other related costs, as well as higher spending and investment in technology, and the impacts of inflation.

Credit Costs Remain a Concern: During the first quarter, the economic outlook deteriorated because of the tariff-related headwinds. HSBC reported ECL of $876 million, jumping 22% year over year. Of this, $150 million related to the heightened economic ambiguity.

HSBC’s Short and Medium-Term Outlook

For 2025, management expects banking NII of $42 billion, with lending likely to remain muted. Further, HSBC's operating expenses are expected to rise 3% on a target basis. Also, ECL charges as a percentage of average gross loans are expected to be between 30 and 40 basis points.

Over the medium term, HSBC expects loan growth to be in the mid-single-digit CAGR range.

HSBC expects a return on average tangible equity in the mid-teens from 2025 to 2027, excluding the impacts of notable items.

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

Progress on HSBC’s Strategic Business Overhaul Plan

In February 2025, HSBC announced a $1.5 billion cost-saving plan from the organizational simplification efforts by 2026. The company will likely incur nearly $1.8 billion in total severance and other upfront charges by the end of next year to implement business simplification efforts.

Separately, the bank announced plans to redeploy an additional $1.5 billion from the strategic reallocation of costs from non-strategic or low-returning activities into its core strategy, where it has competitive strength. In sync with this, HSBC is winding down its mergers and acquisitions and equity capital markets operations in the U.K., Europe and the United States, while maintaining a more focused presence in Asia and the Middle East. It is also progressing with divestments in Germany, South Africa, Bahrain and France, and has begun a strategic review of its business in Malta.

On the strategic growth opportunity front, HSBC plans to grow by strengthening its transaction banking, expanding internationally and building the wealth business, especially in Asia. It is focused on growing in the core markets, Hong Kong and the U.K., by supporting small and medium businesses, improving digital services and offering better products.

Apart from these, HSBC completed the sale of its businesses in the United States, Canada, New Zealand, Greece, Russia, Argentina and Armenia, as well as the retail banking operations in France and Mauritius.

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