HSBC’s profit before tax decreased by $2.4 billion in FY 2025 compared with FY 2024 to $29.9 billion, while profit after tax decreased by $1.9 billion to $23.1 billion, according to a February 25 announcement.
The profit announcement beat analysts' expectations by 9%, while revenue climbed to $68.2 billion, also ahead of expectations. The bank's $1.5 billion target of cost savings by the end of 2026 is also expected to finish six months ahead of schedule this summer. HSBC's shares jumped 6.88% in London on February 25, the same day as the announcement.
The London-headquartered bank attributed the decline in profits “mainly due to a $4.9 billion year-on-year net adverse impact from notable items.” These included dilution and impairment losses of $2.1 billion related to Bank of Communications Co. (BoCom) -- a Chinese bank of which it owns a minority stake and reserve recycling losses of $1.5 billion following the completion of the sale of its French retained portfolio of home and other loans, legal provisions of $1.4 billion and restructuring, and other related costs associated with its reorganising.
Constant currency profit before tax excluding notable items increased by $2.4 billion to $36.6 billion in 2025, from a strong performance in wealth in its international wealth and premier banking and Hong Kong businesses, and from wholesale transaction banking in its Corporate and Institutional Banking (CIB) business.
This was partly offset by a rise in expected credit losses and other credit impairment charges (ECL) and an increase in operating expenses due to planned investment and inflation.
The increase was primarily due to fee and other income growth in wealth from investment distribution and insurance, and in wholesale transaction banking, particularly in foreign exchange in CIB, the bank said. This was partly offset by the year-on-year impact of notable items, mainly relating to business disposals and a dilution loss related to China's BoCom. Constant currency revenue excluding notable items rose by $3.4 billion to $71 billion.
The bank’s net interest income (NII) of $34.8 billion was $2.1 billion higher than 2024 following the reinvestment of its structural hedge at higher yields, deposit balance growth and higher NII in markets treasury. In addition, the increase included the non-recurrence of a $200 million loss in 2024 on the early redemption of legacy securities. This was partly offset by the adverse year-on-year impact of $1.6 billion from business disposals in Argentina and Canada, and margin compression on our deposits.
The growth in NII also reflected a benefit from lower funding costs associated with the trading book of $1.7 billion, the bank said. Banking net interest income (banking NII), which excludes these funding costs, increased by $300 million to $44.1 billion. Net interest margin (NIM) of 1.59% was 3 basis points (bps) higher, reflecting the reinvestment of our structural hedge at higher yields.
ECL were $3.9 billion, an increase of compared with 2024, including charges in both periods related to the commercial real estate (CRE) sectors in Hong Kong and mainland China.
In 2025, the charge in this sector in Hong Kong was $700 million, compared with $100 million in 2024, which reflected higher allowances for new defaulted exposures, the impact of an over-supply of non-residential properties that has put continued downward pressure on rental and capital values, and updates to HSBC's models used for ECL calculations. The 2025 charge in the mainland China CRE sector was $200 million, compared with $400 million in 2024.
Operating expenses increased by $3.4 billion or 10% to $36.4 billion with notable items in 2025 of $3 billion, including legal provisions of $1.4 billion, restructuring and other related costs.
2026 outlook
The bank is targeting YoY growth in revenue from 2026 to 2028, rising to 5% growth in 2028 compared with 2027 excluding notable items and on a constant currency basis.
HSBC group chairman Brendan Nelson commented: “We expect the global economy to expand in 2026. Despite significant policy uncertainty, global trade is also set to grow, supported by the expansion of new trade corridors and the boom in artificial intelligence (AI) hardware demand. Inflation should continue drifting downward, although with divergence across markets. Somewhat uneven growth across industries and geographies could contribute to periodic financial volatility."
Nelson added: “In China, a stronger policy push should anchor its growth, and we expect it to broadly maintain its expansion pace of recent years, as structural reforms start to gain traction. As part of its continued economic transformation, the emphasis will be on strengthening domestic demand – particularly consumption, but also investment. Services consumption will benefit from government policy priorities, as will technology development.”
He continued: “Hong Kong [where HSBC has bought the remainder of Hang Seng Bank] will continue to benefit as the super-connector between mainland China and the rest of the world. Buoyant markets and improvements in consumption are expected to support its growth this year. Elsewhere in Asia, robust consumption and rising exports generated impressive growth in a number of markets, in Asean in particular."
“That combination is expected to continue in 2026. In India, domestic demand will likely be the main driver of growth, reflecting robust consumption, as well as ongoing government infrastructure investment. Economic diversification continues in the Middle East, with deep capital reserves being deployed into significant investments in infrastructure, technology, and human capital. The Asia–Middle East trade, investment, and travel corridor continues to grow.”
He continued: “Europe’s economy will be supported by fiscal expansion, particularly in Germany, coupled with lower effective interest rates and steady consumption growth. We see euro area growth maintaining its recent pace over the next year. In the UK, greater fiscal headroom should give markets and businesses more confidence. Lower expected inflation and interest rates should provide a tailwind for consumption growth. The US should be a key driver of global growth, reaping the benefits of sizeable investments in AI, tax cuts and incentives, as well as substantial deregulation.”
