HSBC Holdings reported a 26% decline in first-half pretax profit, as mounting losses tied to China's Bank of Communications and Hong Kong's commercial real estate sector weighed on earnings. The London-based lender also warned that President Donald Trump's trade tariffs could threaten future profitability targets.
The bank posted pretax profit of $15.8 billion for the first six months of 2025, missing analysts' estimates of $16.5 billion. Second-quarter pretax profit fell 29% year over year to $6.3 billion, also falling short of the $6.99 billion consensus forecast. HSBC's shares dropped 4.5% in London and 3.82% in Hong Kong following the results.
CEO Georges Elhedery attributed the shortfall largely to a $2.1 billion impairment on its stake in Bank of Communications (BoCom), including a $1.1 billion loss from dilution in the Chinese lender's capital raise earlier this year. The write-down follows a $3 billion impairment in February.
"These are accounting-related impairments... they do not impact the outlook we have on the Chinese economy, they are paper losses," Elhedery said on the earnings call.
HSBC's expected credit losses jumped by $900 million to $1.9 billion from the same period last year, driven in part by continued weakness in Hong Kong's property sector. Hang Seng Bank, which is 62% owned by HSBC, reported a 224% year-on-year increase in Hong Kong real estate credit charges in the second quarter, sending its shares down nearly 7%.
Despite the earnings miss, HSBC announced a new $3 billion share buyback, on top of an earlier $3 billion program, and declared an interim dividend of 10 cents per share.
Operating expenses rose 10% from a year earlier, due to restructuring charges and increased technology investments. The bank is pursuing a broad global overhaul, reviewing its retail operations in Australia, Indonesia, and Sri Lanka, while preparing to wind down its Bangladesh retail business in the second half.
Elhedery emphasized the bank's pivot toward Asia and the Middle East while scaling back in Western markets. Bloomberg reported that HSBC plans to lay off members of its equities team in Germany and continue winding down its M&A and equities businesses in Europe and the Americas.
The bank's corporate and institutional division, now its top earner following last year's reorganization, posted $6.4 billion in pretax profit in the first half, a 4% increase year-on-year - the only one of HSBC's four main business segments to register profit growth.
