HSBC 2024 Earnings In

HSBC Holdings (LON: HSBA) delivered earnings report for 2024. While the bank’s restructuring efforts are aggressive, traders should be aware of the near-term risks—falling interest rates, costly layoffs, and sluggish revenue growth. With a $2 billion share buyback and dividend hikes, HSBC is making moves to keep investors engaged, but will that be enough?

1. EPS Holds Steady, But Revenue Growth Stalls

HSBC reported earnings of $1.24 per share, up from $1.14 a year earlier and in line with analysts' expectations. However, revenue declined to $65.85 billion, slightly missing the $66.09 billion estimate. This signals that while HSBC is controlling costs effectively, it is struggling to drive top-line growth.

Key concern for traders:SBC’s revenue has stagnated, raising questions about its ability to generate organic growth. If loan and fee growth fail to offset declining interest income, the stock may face selling pressure.

2. Cost-Cutting Strategy

Under new CEO Georges Elhedery, HSBC is taking drastic steps to cut costs by $1.5 billion annually by 2026, with $300 million in savings expected in 2025. This comes at a price—$1.8 billion in severance and restructuring costs over the next two years.

HSBC’s cost-cutting plan includes:

• 8% workforce reduction, particularly in investment banking.
• Merging investment banking with commercial banking.
• Splitting HSBC into two geographic divisions:
  • Eastern markets (Asia & Middle East)
  • Western markets (Europe & Americas)

While this restructuring could make HSBC leaner and more profitable long-term, traders should note that layoffs and restructuring rarely lead to immediate stock gains—investors tend to price in short-term costs before rewarding efficiency improvements.

Key trading takeaway:Expect volatility. HSBC's restructuring may take time to show tangible benefits. Near-term stock moves could depend on how the market digests restructuring costs versus long-term efficiency gains.

3. Dividend Hike & Buyback to Support the Stock

To keep investors engaged, HSBC increased its total dividend to $0.87 per share for 2024 and announced a $2 billion share buyback set to be completed by Q1 2025.

What this means for traders

• The dividend increase and buyback should provide some support for HSBC’s share price.
• However, if revenue pressures mount and interest rates decline, these moves may not be enough to prevent downside risk.

4. 2025-2026 Revenue Problems: The Real Risk for HSBC

RBC Capital Markets warns that HSBC faces significant revenue obstacles in 2025-2026 from:

• Falling interest rates, which will squeeze net interest margins.
• Business disposals, which may shrink HSBC’s revenue base.
• Foreign exchange volatility, impacting global earnings.

While loan and fee growth may partially offset these challenges, revenue stagnation remains a risk. HSBC’s ability to execute its restructuring while maintaining profitability will determine whether shares hold up.

Trading Note: If HSBC’s Q1 and Q2 2025 results confirm revenue struggles, expect analysts to cut forecasts—potentially putting pressure on HSBC’s stock.

5. Stock Outlook

• HSBC’s Q4 2024 pretax profit exceeded expectations by 9%, thanks to cost controls.
• However, analysts warn that market expectations are high—leaving little room for upside surprises.

Bullish case - If cost cuts improve profitability faster than expected, HSBC could outperform analyst estimates. The buyback and dividend increase may attract income investors, providing price stability.

Bearish case - If revenue continues to decline, cost-cutting alone won’t be enough to justify HSBC’s valuation. HSBC’s pivot to Asia is a long-term play, meaning traders looking for short-term gains may be disappointed.

HSBC Bottom Line Is

For short-term traders, HSBC presents a high-risk, high-reward scenario. The buyback and cost-cutting efforts could drive short-term rallies, but weak revenue growth and falling rates pose a real threat to long-term upside.

For long-term investors, HSBC’s restructuring could pay off over time, but for traders, it’s all about how well HSBC manages near-term risks. Expect volatility as the market digests the restructuring plan and revenue obstacles.