HSBC, Europe’s largest bank by assets, reported a weaker-than-expected performance for the second quarter of 2025, citing rising restructuring costs and economic uncertainty. Despite the profit miss, the bank announced a $3 billion share buyback to reassure investors.
Key Q2 Figures vs. Expectations:
- Pre-tax profit: $6.3 billion (down 29% YoY) vs. $6.99 billion expected
- Revenue: $16.5 billion vs. $16.67 billion expected
The shortfall was primarily due to impairment charges and a 10% rise in operating expenses, which HSBC attributed to restructuring initiatives and heavier investment in tech.
Shares listed in Hong Kong fell 2.71% following the announcement.
Economic and Strategic Challenges
CEO Georges Elhedery pointed to global structural headwinds — including tariffs and fiscal imbalances — as contributing to heightened uncertainty and volatile markets. These factors, he said, are “complicating the inflation and interest rate outlook,” even before tariffs take effect.
While HSBC believes it’s well-equipped to handle these disruptions, the bank warned that returns on tangible equity (RoTE) could fall below its mid-teens target in the coming years due to macroeconomic pressures.
The bank expects demand for lending to remain subdued through the rest of the year, but projects continued strength in its wealth management division, with expectations for double-digit annual growth in fee-based income over the medium term.
Investment Bank Overhaul
HSBC is moving ahead with its plan to streamline investment banking operations, particularly outside Asia and the Middle East. According to recent reports, the bank will be cutting several roles from its equities team in Germany as part of this broader restructuring.
This follows an earlier decision to shut down its M&A advisory and parts of its equities business in Europe and the Americas. The reorganization, launched last year, aims to simplify HSBC’s structure by dividing operations into “Eastern” and “Western” markets, with projected cost savings of $300 million in 2025.
Leadership Transition
An additional challenge looms as Chairman Mark Tucker prepares to step down in September. Finding the right successor will be crucial, especially as CEO Elhedery continues pushing for simplification and cost discipline while maintaining the bank’s focus on Asia.
Morningstar analyst Michael Makdad noted that HSBC must strike a balance between cost-cutting and keeping its Asian shareholders aligned with the bank’s strategic direction.
