HSBC Holdings delivered a return on tangible equity (RoTE) of 17.2% in 2025, excluding notable items — up 160 basis points year-on-year, a year ahead of its own upgraded mid-teens target and the strongest underlying result in the bank's recent history. Group chief executive Georges Elhedery described it as a year in which the bank “performed, transformed and invested for growth.”

Profit before tax (PBT) on the same basis reached $36.6 billion, up 7% to a record high, on revenue of $71 billion, up 5%. Earnings per share (EPS) rose 15% to $1.51. The ordinary dividend was $0.75 per share, up 14%, and total distributions including buybacks since the third quarter of 2024 have exceeded $32 billion — more than four times the original three-year $8 billion commitment.

The return was driven by four compounding factors: a $593 billion structural hedge reinvesting at progressively higher yields through 2028, deposit growth of $78 billion across all four segments, wealth fee income up 24% to $9.4 billion and a Corporate and Institutional Banking (CIB) network business generating $7.6 billion from cross-border trade and financial institution flows.

The reported figures, however, tell a different story. Reported profit before tax of $29.9 billion fell 7%, weighed down by $6.7 billion in notable items: a $2.1 billion non-cash accounting impairment and dilution on its Bank of Communications associate, $1.4 billion in legal provisions principally related to the Herald Fund litigation, $1.0 billion in restructuring charges and $1.5 billion in reserve recycling losses on the French loan portfolio disposal.

The resulting reported RoTE was 13.3% — a 390-basis point gap to the underlying figure that has now persisted across two consecutive years. Elhedery characterises these items as portfolio-rationalisation-related and non-recurring.

The group’s total assets reached $3.233 trillion. Net interest margin (NIM) was 1.59%, up 3 basis points. The loans-to-deposits ratio fell from 61% to 57%, and the expected credit loss (ECL) charge of 39 basis points came in within guidance.

Sustained returns from hedge, deposits and cost efficiencies

Group chief financial officer Pam Kaur pointed to two factors that will more than offset the impact of falling rates in 2026: deposit growth and the tailwind from the structural hedge. The $593 billion hedge — with an average remaining life of approximately 3.1 years — reinvests maturities in 2026, 2027 and 2028 at approximately 2.7%, 3.4% and 3.7% respectively, locking in a yield contribution that rises year on year regardless of central bank decisions.

Kaur stated the outcome directly: "We expect full-year 2026 banking NII of at least $45 billion, with the impact of expected lower rates more than offset by deposit growth and the tailwind from our structural hedge." The results presentation discloses that a 100-basis point parallel downward shock would reduce banking NII by approximately $3.4 billion annually across major currencies — the hedge cushions but does not eliminate this exposure.

Customer deposits reached $1.787 trillion in 2025, growing across all four segments simultaneously — Hong Kong up $37 billion, the UK up $11 billion, CIB up $10 billion and International Wealth and Premier Banking (IWPB) up $9 billion. Elhedery described the deposit base as "a core strength" contributing "the lion's share of our banking NII."

On costs, Kaur grounded the 2026 target of approximately 1% target basis growth in completed work: "We are ahead on our simplification saves... This gives us incremental saves of $700 million in full-year 2026." The cost-to-income ratio fell to approximately 48.7% in 2025, down from around 51% the prior year, reflecting $1.2 billion in simplification savings already actioned against an original $1.0 billion target. The structural hedge, deposit growth and cost simplification are therefore distinct and compounding earnings levers.

Elhedery has also committed to redirecting $1.8 billion of costs — currently allocated to non-strategic or low-returning activities — toward priority growth areas over the medium term, up from an original $1.5 billion target. The additional $300 million reflects Hang Seng cost synergies that will be reinvested into Hong Kong.

Wealth and fee income drive structural growth

Wealth fee and other income grew 24% to $9.4 billion. Kaur noted that “all four income areas” drove the result and that the breadth “shows the sharpening of our strategy is working.” A portion reflects strong markets; the majority reflects franchise investment: 275,000 new affluent clients added across the year, $80 billion in net new invested assets and affluent assets under management (AUM) of $447 billion, up 14%.

Kaur was direct on geography: “Wealth is not just a Hong Kong story; it runs across our Asia and Middle East franchise, with double-digit Invested asset growth in Singapore, mainland China, India and the UAE.” Approximately 27 Wealth Centres were opened during the year, bringing the network to 64 across Asia and the Middle East.

The insurance contractual service margin (CSM) reached $14.6 billion, up 21%, with $3.4 billion in new business CSM written in 2025 — contractually committed future income independent of market conditions.

Wholesale Transaction Banking added $10.9 billion in fee income, up 4%, validated by Kaur as having withstood “a range of economic, market and tariff situations.” Elhedery noted in the results briefing that 90% or more of non-interest income is generated by transaction banking and wealth — both businesses that expand the fee pool without proportional growth in risk-weighted assets.

Hang Seng privatisation unlocks cross-referral and scale

HSBC took full ownership of Hang Seng Bank on 26 January 2026, completing a $13.7 billion privatisation that Elhedery described as reflecting the group's “confidence and conviction in Hong Kong's future growth.” The strategic logic is constraint removal: full ownership enables product cross-referral, balance sheet flexibility and technology harmonisation that minority ownership precluded. Hang Seng retains its brand, branch network and authorised institution status.

The $3.8 billion elimination of disallowed minority capital reduces net common equity tier 1 (CET1) consumption to $9.9 billion — a 110-basis point reduction in the CET1 ratio, equivalent in Kaur’s framing to buying back 4% of group shares at announcement, with minority interest savings and synergies together exceeding the buyback return threshold.

CET1 fell to approximately 13.8%, below the 14% to 14.5% target operating range. Restoration is expected within three quarters through organic capital generation. Share buybacks are suspended in the interim; Kaur confirmed the decision to reinstate them will be taken quarterly once the target range is restored, and that the 50% dividend payout ratio is unaffected by the temporary shortfall.

The synergy structure splits into two tiers for an accounting reason. Kaur was precise: “The $500 million is what I would call the reported synergies following accounting rules. The $400 million synergies are depending to some extent on markets and customer behaviour, so there is some degree of uncertainty.”

Of the $500 million, $300 million of the cost component will be reinvested into Hong Kong growth rather than taken to the bottom line. A $600 million restructuring charge — weighted toward technology harmonisation rather than severance — will flow through to 2028 as a material notable item.

Targets upgraded as all segments delivered

All four HSBC segments grew revenue and deposits and delivered mid-teens or better RoTE excluding notable items. Hong Kong led at 35.5% RoTE on revenue of $15.9 billion. The UK delivered 22.9% RoTE with customer loan growth of 6% and Business Banking lending up 13% excluding Covid run-off. CIB produced $27.6 billion in revenue at 16.2% RoTE, with approximately 60% now derived from network activities — trade, FI flows and cross-border corridors — following the deliberate exit of more than 3,000 smaller clients. IWPB contributed $14.6 billion at 19.0% RoTE.

HSBC has raised its stated RoTE target from mid-teens to 17% or better for each of 2026, 2027 and 2028 — a target range applied uniformly across the three-year period, conditional on balance sheet evolution and reinvestment assumptions.

Kaur confirmed revenue growth will be “positive each year, but also progressive, and reaching 5% by 2027 to 2028,” with 2026 a transition year for banking NII and fee businesses carrying more of the burden. Elhedery added: “We've delivered 5% revenue growth in 2025, 4% in 2024. It's just the footprint we're in.” The 50% dividend payout ratio is maintained for each year through 2028.

Rates, CRE, integration risks and the path forward

The three-year commitment comes with risks worth tracking. Rate sensitivity remains a quantifiable exposure. The results presentation discloses the Hong Kong commercial real estate (CRE) portfolio at approximately $8.7 billion sub-standard and credit-impaired, of which $1.9 billion is credit-impaired with LTV above 70% and ECL allowances of $900 million held against it — a residual gap of approximately $1 billion against group underlying PBT of $36.6 billion.

The mainland China CRE portfolio is disclosed in the results presentation at below $1.5 billion, with ECL charges below $200 million in 2025; Kaur described it in the transcript as having “really come down” with the bank feeling “much better about it compared to where we started.”

Kaur guided for a 2026 ECL charge of approximately 40 basis points of average gross loans — broadly stable on the 39 basis points recorded in 2025, but at the higher end of the bank's typical range, reflecting remaining pressures in Hong Kong office and retail property.

Hang Seng integration carries execution complexity — technology harmonisation across two legacy systems is, in Kaur's words, “really quite critical” to achieving the $900 million benefit ambition.

HSBC enters 2026 with a $1.787 trillion deposit franchise growing across all four segments, a structural hedge providing rising NII yields through 2028, a wealth business with $14.6 billion in contractual forward insurance income and a Hong Kong franchise delivering 35.5% RoTE which the Hang Seng privatisation is designed to extend.

Elhedery closed the results briefing with the test the next three years will be measured against: “We are creating a simple, agile, growing bank, built to generate high returns.” Whether the 17% target, 50% payout, and 14% to 14.5% CET1 framework holds simultaneously will depend on Hang Seng integration execution, the pace of structural hedge tailwind moderation and whether wealth fee income maintains its growth trajectory.