HSBC is expected to incur $1.8 billion in expenses by the end of next year due to a restructuring plan initiated by its new CEO. The bank announced earnings for 2024 that surpassed market expectations, along with a new $2 billion share buyback program. Despite this, the stock only saw marginal gains as analysts expressed concerns over heavier restructuring charges than anticipated.
The bank reported a 6.6% increase in pre-tax profit for 2024, reaching $32.3 billion, slightly above the average analyst estimate. HSBC aims to reduce costs by around $300 million in 2025 and commit to an annual cost base reduction of $1.5 billion by the end of 2026. CEO Elhedery highlighted that these measures will involve upfront expenses of $1.8 billion by next year to achieve efficiency by eliminating duplicated roles.
Elhedery, who assumed the role of CEO in September, is prioritizing boosting returns and emphasizing the bank's presence in Asia, its primary revenue source. HSBC plans a mid-teens percentage return on average tangible equity between 2025 and 2027, despite a challenging rate environment. The bank also revealed a focus on cost reduction, with headcount decreasing by 3% last year.
Regarding the financial performance, the wealth and personal banking sector recorded a $12.2 billion profit for 2024, a 5.2% increase from the previous year, fueled by new customer acquisitions and increased wealth management sales. Global banking and markets profits surged by nearly 27% to $7.1 billion, showing a positive trend amidst the cost-cutting initiatives.
HSBC is also set to issue a fourth interim dividend of $0.36 per share, totaling $0.87 for 2024, inclusive of a special dividend. Elhedery, known for his swift decision-making, is driving organizational changes by eliminating senior management positions and reshaping the bank's operations, particularly in Europe, the Americas, and Asia.
Lastly, HSBC announced an extension of its sustainability targets to mid-century, aligning with global trends towards enhanced environmental commitments.