Latest figures paint rosy picture as it takes more home lending business
HSBC Holdings plc has reported its interim results for the first half of 2024, showcasing a robust performance in its mortgage sector despite ongoing market challenges. The bank’s mortgage business remains a crucial component of its overall strategy in which it has been interest rate slashing enthusiastically to maintain and expand market share.
Key highlights from HSBC’s interim results
- Stable mortgage growth:
- HSBC reported a 1% increase in customer loans, reaching £738 billion by the end of the second quarter of 2024, up from £730 billion in the first quarter. This growth was partly driven by the mortgage sector, reflecting a stable demand for home loans.
- Market share and competitive positioning:
- The bank maintained its competitive edge in the UK mortgage market with a market share of 8.1%, up by 0.3 percentage points from the previous year. This follows the bank’s focus on attracting new mortgage customers despite higher interest rates and market volatility.
- Net interest income (NII):
- HSBC’s Banking NII remained stable at £8.5 billion for the second quarter of 2024. The UK Retail Banking and Wealth Management (RFB) division, which includes the mortgage business, played a crucial role in sustaining this income, contributing significantly to the bank’s overall performance.
- Customer deposits and lending:
- Customer deposits grew by 2% to £1.247 trillion, while mortgage lending in the UK increased by £800 million, reflecting the bank’s successful efforts in expanding its lending portfolio.
Challenges and market conditions
The mortgage market has faced several challenges, including rising interest rates and economic uncertainty. However, HSBC has managed to navigate these hurdles effectively. The bank’s focus on maintaining a competitive edge through attractive mortgage products and efficient customer service has paid off, resulting in steady growth and market share gains.
Looking ahead
HSBC’s outlook for the remainder of 2024 remains optimistic. The bank expects continued growth in its mortgage sector, driven by a stable demand for home loans and favourable market conditions. The anticipated cut in interest rates by the Bank of England could further boost the mortgage market, providing additional opportunities for growth.
Solid first-half performance amid challenging conditions
HSBC delivered a steady financial performance in the first half of 2024, with profit before tax holding firm at $21.6 billion. While this represents a modest 2% decline in profit after tax to $17.7 billion, the underlying performance was more resilient.
A series of strategic moves impacted the headline figures. The sale of the Canadian banking operation generated a $4.8 billion gain, offset by a $1.2 billion impairment on the Argentinian business. These, alongside other one-off items, masked a more consistent underlying performance. Excluding these exceptional items, profit before tax remained steady in constant currency terms at $18.1 billion.
Revenue edged up 1% to $37.3 billion, driven by growth in wealth management and securities trading. However, net interest income (NII) dipped by $1.4 billion due to factors including business disposals and increased funding costs. Despite this, the bank managed to expand its net interest margin by a modest 1%.
Credit quality remained robust, with impairment charges falling by $0.3 billion to $1.1 billion. This positive trend was evident across most business lines, reflecting improving economic conditions. However, operating expenses climbed 5% to $16.3 billion, primarily due to increased technology spending and inflationary pressures.
Customer lending remained stable overall, with growth in key markets like mainland China and India offsetting declines elsewhere. Customer deposits increased, particularly in Asia, reflecting strong client activity.
The bank maintained a strong capital position, with the Common Equity Tier 1 (CET1) capital ratio rising to 15%. Shareholders were rewarded with a second interim dividend of $0.10 per share and a proposed share buyback of up to $3 billion.
Looking ahead, HSBC aims for a mid-teen return on tangible equity (RoTE) in both 2024 and 2025. The bank expects banking NII to reach around $43 billion in 2024, while keeping a lid on cost growth at approximately 5%. Credit quality is expected to remain solid, with impairment charges within the target range.
