By Sherry Qin
HSBC Holdings' annual profit fell but topped market expectations as the lender pressed ahead with efforts to simplify its sprawling operations and strengthen its position in the U.K. and Hong Kong.
Europe's biggest bank by assets has been undergoing a broad organizational revamp under Chief Executive Georges Elhedery, who took over in the fall of 2024. Since then, he has set about cutting costs, streamlining its businesses and accelerating a pivot to Asia, where the lender makes most of its profit, pushing for HSBC become a more "simple, more agile, focused bank."
Investors have largely cheered the bank's efforts to focus capital and energy on markets where it has an edge. After surging more than 60% last year, Hong Kong-listed HSBC shares have risen an additional 15% in 2026, pushing its market capitalization to about $300 billion.
Elhedery on Wednesday described 2025 as a year of "decisive action and swift execution," adding that the bank is on pace to exit nonstrategic and low-returning activities, and will achieve its $1.5 billion cost-reduction goal by the first half, six months ahead of plan.
At the same time, the U.K.-based bank has continued to consolidate its position as a financial bridge between the West and China. HSBC last month completed its nearly $14 billion buyout of Hang Seng Bank, a smaller Hong Kong lender it had long controlled. Analysts say it makes sense for HSBC to increase its exposure to the high-returning Hong Kong market, and that absorbing Hang Seng Bank would simplify its business there. The bank expects to release $0.3 billion from the cost synergies.
HSBC also raised its target for return on tangible equity--a key profitability measure for banks--to 17% or better over the next three years, up from the mid-teens goal it set previously for the three years through 2027.
For 2025, HSBC's pretax profit dropped 7.4% to $29.91 billion, exceeding the $28.88 billion analysts polled by Visible Alpha expected, while net profit declined 8%.
Impairment losses related to its stake in major Chinese lender Bank of Communications, losses following the disposal of its French loan portfolio and the $1.1 billion provision for a lawsuit tied to Bernie Madoff's multibillion-dollar Ponzi scheme all weighed on the bank's bottom line.
HSBC's net interest income--the difference between what it earns on loans and pays on deposits--rose to $34.8 billion in 2025, and it expects banking NII to reach at least $45 billion this year.
Its wealth fee and other income across businesses climbed 24% to $9.4 billion last year. Like its Asian peers, HSBC is experiencing a boost in its wealth-management businesses amid rapid wealth accumulation in the region, while continuing geopolitical and trade uncertainties are driving demand for diversified wealth products.
The lender also forecast revenue growth over the next three years, accelerating to 5% in 2028.
Jefferies analysts said HSBC ended 2025 on a strong note, supported by robust net interest income and growth in its wealth segment, while its guidance implies a high-single-digit upgrade to consensus.
"Overall a good print, a reassuring strategy update, welcome new information on Hang Seng and enhanced targets," Citi wrote.
Write to Sherry Qin at sherry.qin@wsj.com
(END) Dow Jones Newswires
February 25, 2026 02:49 ET (07:49 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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