HSBC Holdings plc (HSBA) shares saw a notable increase of 3% midday on Wednesday, capturing investors' attention as markets reacted positively to the banking giant's fiscal 2025 guidance, which surpassed expectations following a 'strong profit performance' in the first half of 2024. The outlook indicates a robust return on tangible equity anticipated in the mid-teens for both 2024 and 2025, excluding any notable items.
Moreover, HSBC forecasts a staggering $43 billion of banking net interest income in 2024, contingent upon the trajectory of global interest rates. The bank has reaffirmed its guidance of a 5% growth in costs and a dividend payout ratio maintained at 50% for the year ahead. As part of its medium to long-term strategy, HSBC continues to expect a mid-single-digit year-on-year percentage growth rate in customer lending, a beacon of stability amid economic fluctuations. In its financial disclosures for the six months ending June 30, HSBC reported a slight decrease of 2% in profit after tax compared to the previous year, totaling $17.67 billion, while revenues edged up by 1% to $37.29 billion.
The increase in operating expenses, which rose by 5% year over year, can be attributed to higher spending on technology and investments, compounded by inflationary pressures and rises in performance-related pay. Analyst Benjamin Toms from RBC Capital Markets expressed caution, stating, 'Following strong performance in 2023, we think the bank's earnings momentum has come to an end.
HSBC's net interest income (NII) is negatively geared to falling rates, which are expected across HSBC's core geographies over 2024 and 2025. This headwind will be partially offset by hedging and balance sheet growth, but this growth is unlikely to be remarkable.' Group Chief Executive Noel Quinn, whose surprise retirement announcement came mid-July, highlighted the group's record profit in 2023 and lauded its strategy for generating revenue that is more resilient to interest rate changes.
'Over the last five years, we have taken a number of actions to reduce our sensitivity to interest rates and create the bank of the future,' Quinn noted, underlining the importance of strategic foresight in their operations. Quinn's departure is scheduled for September 2. In the interim, Chief Financial Officer Georges Elhedery will step up as interim CEO, while Global Financial Controller Jonathan Bingham assumes the role of interim CFO until a permanent finance chief is appointed. In a further show of confidence, HSBC is gearing up to initiate a share buyback program worth up to $3 billion over the next three months, augmenting an earlier $3 billion share repurchase initiated following their first-quarter results.
With an unchanged second interim dividend of $0.10 per share, the bank's total planned distributions amount to a significant $4.8 billion, underscoring its commitment to returning value to shareholders. Current share price stands at $702.30, reflecting a change of $+25.40, and a percent change of +3.75%..