# HSBC Holdings plc (NYSE: HSBC) — Company narrative, FY26Q2 Period covered: the half-year and second quarter ended 30 June 2026, with the FY2025 annual report as the backbone. HSBC reports in US dollars, so every amount below is as the company reported it, and no currency conversion was needed. Per-share amounts are per ordinary share. Each American Depositary Share (ADS) represents five ordinary shares. HSBC reports under IFRS Accounting Standards. "Notable items" and "constant currency" are the company's own adjusted measures, and they are labelled wherever they are used. --- ## Business *Source: FY2025 Annual Report on Form 20-F (Annual Report and Accounts 2025), accession 0001089113-26-000010.* HSBC is one of the world's largest banks, with total assets of $3.23 trillion at 31 December 2025 ($3.44 trillion at 30 June 2026). It is a universal bank that takes deposits from, lends to and moves money for retail customers, wealthy individuals, small businesses, corporates and financial institutions in 56 markets. Its heaviest concentration is in Hong Kong and the UK, its two home markets. Deposits fund the business: customer accounts were $1.79 trillion at end-2025, against net customer loans of $988 billion, a loan-to-deposit ratio of 55%. HSBC reports a surplus of deposits over loans in each of its four businesses and in its main operating banks. The company earns money in two ways. The first is net interest income on that deposit base, which management tracks as "banking NII" ($44.1 billion in 2025). The second is fee and other income ($26.9 billion), which comes mainly from two franchises. Wealth (investment distribution, insurance, private banking and asset management) contributed $9.4 billion, and Wholesale Transaction Banking (foreign exchange, payments, trade finance and securities services) contributed $10.9 billion. Together these made up 2025 revenue excluding notable items of $71.0 billion. Reported revenue was $68.3 billion. Since 1 January 2025 HSBC has been organised into four businesses plus a Corporate Centre. The figures below are 2025 revenue and reported profit before tax, as the 20-F gives them. - **Hong Kong** (revenue $15.9 billion, profit before tax $9.6 billion): Retail Banking and Wealth and Commercial Banking at HSBC Hong Kong and at Hang Seng Bank. HSBC is the market leader in Hong Kong, with a deposit share of about 25% on deposits of more than $540 billion and a 32.6% share of trade finance. Hang Seng Bank became wholly owned in January 2026 and keeps its own licence, brand and branches. - **UK** (revenue $12.9 billion, profit before tax $6.7 billion): UK Retail Banking and Wealth and UK Commercial Banking, including first direct, M&S Bank and HSBC Innovation Bank. It has more than $300 billion of customer loans and an 8.1% share of UK mortgages. - **Corporate and Institutional Banking (CIB)** (revenue $27.6 billion, profit before tax $11.4 billion): the international network business. It combines Commercial Banking outside the UK and Hong Kong with Global Banking and Markets. It holds about $600 billion of deposits and facilitated about $900 billion of trade in 2025. HSBC is a leading provider of cross-border payments, cash management and foreign exchange. - **International Wealth and Premier Banking (IWPB)** (revenue $14.5 billion, profit before tax $4.4 billion): Premier banking outside Hong Kong and the UK, plus the Private Bank, Asset Management and Insurance. The insurance contractual service margin, a store of future insurance profit, was $14.6 billion at end-2025. - **Corporate Centre** holds the Group's largest associate stake, a 16.00% interest in Bank of Communications (BoCom). The stake was cut from 19.03% when BoCom completed a capital issuance in June 2025. HSBC also owns an associate stake in Saudi Awwal Bank. Outside its home markets, HSBC focuses on mainland China, India, Singapore and the UAE. It is the largest foreign bank in India, Singapore and the UAE, and in 2025 those three markets earned profit before tax of $1.9 billion, $1.5 billion and $0.8 billion. Wealth balances across the Group were $2.1 trillion at end-2025, of which $1.2 trillion was booked in Asia. On a new definition adopted from 2026, which adds wealth customers' deposits and removes third-party distribution assets, the figure was $1.6 trillion. The Group had 208,720 full-time-equivalent staff at end-2025. **Strategy.** Under Group CEO Georges Elhedery the strategy is to simplify the bank, exit non-core businesses and reinvest the money saved in Wealth, transaction banking and the two home markets. The four-business structure halved the number of operating businesses. HSBC announced 11 business exits in 2025, among them Malta, Uruguay, the UK life insurer, German custody, Bahrain and Sri Lanka retail, its stake in Grupo Financiero Galicia, and M&A and equity capital markets advisory in the US, UK and Europe. These followed the 2024 disposals of the Canadian banking business and the Argentine business. The largest strategic move was the $13.7 billion (HK$106 billion) privatisation of Hang Seng Bank, which completed on 26 January 2026. Management expects $0.5 billion of pre-tax revenue and cost synergies from it by the end of 2028, at a cost of $0.6 billion in restructuring. In February 2026 HSBC set targets for 2026–2028: - a return on average tangible equity (RoTE), excluding notable items, of 17% or better in each year; - revenue growth, at constant currency and excluding notable items, rising to 5% in 2028; - a dividend payout ratio of 50% on its target basis; - a CET1 capital ratio managed within 14%–14.5%. HSBC traces its origins to 1865, when it was founded to finance trade between Hong Kong, Shanghai and the rest of the world. That history explains why Asia and trade finance still sit at the centre of the franchise. --- ## Risk factors *Source: FY2025 Form 20-F, "Risk overview" and "Risk factors", accession 0001089113-26-000010; updated top risks from the Interim Report 2026 on Form 6-K, accession 0001089113-26-000025.* These are the risks the company itself treats as most material, condensed. - **Macroeconomic, interest-rate and tariff exposure.** Earnings depend on the global cycle. Volatile US trade and tariff policy is the main source of uncertainty: it could cut trade flows, investment and customer activity. Lower policy rates squeeze net interest margins, while higher rates raise debt-service costs and credit losses. HSBC also warns that if the productivity gains priced into high AI and technology valuations do not arrive, a sharp market correction could hurt growth, collateral values and customers' finances. - **Geopolitics, US–China competition and sanctions.** Asia, and Hong Kong in particular, contributes a large share of Group profit, so US–China tensions matter more to HSBC than to most banks. These include tariffs, export controls, investment restrictions and developments around Hong Kong and Taiwan. Complying with the law of one jurisdiction can be seen as backing its policy against another's. The US has broad discretion to sanction non-US banks over Russia-related dealings, and such action against any HSBC entity would have severe commercial and reputational consequences. By mid-2026 the conflict in the Middle East had added oil-price volatility and supply-chain disruption, and HSBC is monitoring potential impacts on its Gulf operations. - **Commercial real estate in Hong Kong and mainland China.** Excess supply has kept mainland property weak. In Hong Kong, an oversupply of non-residential property has pushed rents and capital values down and liquidity remains tight for mid-sized and sub-investment-grade borrowers. Hong Kong CRE charges were $0.7 billion in 2025 and a further $0.2 billion in 1H26. - **Credit and model risk.** Expected credit losses rest on forward-looking scenarios and models that may not capture new risks. Management overlays are used where models fall short. Portfolio-level provisions may also miss idiosyncratic losses. In 1H26 a single fraud-related securitisation exposure cost $0.4 billion. - **Regulation and capital.** Basel 3.1 takes effect largely from 1 January 2027, with an output floor and new risk-weighting approaches. The UK is reviewing bank capital levels and ring-fencing. The EU branch requirement, effective from 11 January 2027, forces non-EU banks to serve EU clients through local branches or subsidiaries. A programme to strengthen regulatory reporting may still affect reported ratios such as CET1, the liquidity coverage ratio (LCR) and the net stable funding ratio (NSFR). - **Litigation and investigations.** HSBC faces large legacy claims. The largest are the Madoff-related suits. In Luxembourg, Herald Fund seeks $521 million in cash plus restitution of securities, or alternatively $5.6 billion in damages, and HSBC holds a $1.1 billion provision against that case. Alpha Prime seeks up to $3.3 billion and Senator Fund $1.4 billion. HSBC also faces US Anti-Terrorism Act suits, foreign-exchange and precious-metals antitrust claims, and money-laundering investigations of HSBC Private Bank (Suisse) in Switzerland and France. HSBC Bank USA, the Group's main US-dollar correspondent bank, carries heightened financial-crime risk from the business it clears for non-US affiliates. - **Resolution regime.** If HSBC were failing, the Bank of England's powers under the UK Banking Act 2009 would allow ordinary shares to be cancelled, transferred or heavily diluted through bail-in. The preferred strategy for HSBC is a Multiple Point of Entry bail-in. - **Funding and ratings.** Demand and short-notice deposits are the core of HSBC's funding. HSBC Holdings also relies on wholesale markets: it issued $25.7 billion of senior debt in 2025. A ratings downgrade or market disruption would raise funding costs, require more collateral and squeeze margins. - **Currency translation.** HSBC reports in US dollars, but much of its business is in other currencies. A weaker or stronger dollar, or a currency de-pegging from the dollar, moves reported income, equity and capital. - **Technology, cyber, AI and third parties.** HSBC runs a large, complex technology estate and depends on third-party suppliers. AI is making cyber-attacks faster and more scalable. Data-localisation and privacy laws limit intra-group data sharing, which matters for cross-border financial-crime controls. - **Strategic execution.** The reorganisation, the cost programme and a long list of disposals carry risk at the same time: the targeted savings and returns may not arrive, and disposals can crystallise losses through currency-reserve recycling. - **Holding-company structure.** HSBC Holdings depends on dividends and interest from its subsidiaries to service its debt and pay shareholders, and local regulators and laws can restrict those payments. - **Accounting judgements.** The value-in-use test on the BoCom stake led to a $1.0 billion impairment in 2025, and the company says further impairment cannot be ruled out. Other significant judgements cover goodwill, deferred tax, legal provisions and fair values. - **ESG and climate.** Climate change brings credit, conduct, greenwashing and litigation risk. Requirements and expectations diverge across the UK, EU and US, which complicates compliance. --- ## Management's discussion — FY2025 *Source: FY2025 Form 20-F, "Highlights", "Financial overview" and Group CEO's letter, accession 0001089113-26-000010.* **Earnings.** Reported profit before tax fell 7% to $29.9 billion, and profit after tax fell to $23.1 billion. The decline was driven by notable items, which had a net adverse effect of $4.9 billion compared with 2024. The 2025 items were: - $2.1 billion of dilution and impairment losses on BoCom; - $1.5 billion of reserve-recycling losses on the sale of the French retained home-loan portfolio; - $1.4 billion of legal provisions, including the Madoff-related Luxembourg claim; - $1.0 billion of restructuring costs from the simplification programme. 2024, by contrast, had included a $4.8 billion gain on selling the Canadian bank. Against that, Argentina brought a $1.0 billion disposal loss and $5.2 billion of reserve recycling. Excluding notable items and at constant currency, profit before tax rose 7% to $36.6 billion. RoTE was 13.3% reported and 17.2% excluding notable items, beating the "mid-teens" target. Basic EPS was $1.21, against $1.25 in 2024. **Revenue and margins.** Reported revenue rose 4% to $68.3 billion, and revenue excluding notable items rose 5% to $71.0 billion at constant currency. The growth came from fees. Wealth fee and other income rose 24% to $9.4 billion, led by insurance (a higher release of contractual service margin), the Private Bank and investment distribution. Wholesale Transaction Banking rose 4% to $10.9 billion, led by foreign exchange during volatile markets. Net interest income rose $2.1 billion to $34.8 billion. Maturing structural hedges were reinvested at higher yields, deposits grew, and funding costs for the trading book fell by $1.7 billion. Together these outweighed a $1.6 billion loss of income from the Argentine and Canadian disposals and tighter deposit margins. Banking NII was broadly flat at $44.1 billion, and the net interest margin rose 3 basis points to 1.59%. **Credit, costs and tax.** Expected credit losses rose to $3.9 billion, or 39bps of average loans, including $0.7 billion on Hong Kong CRE and $0.2 billion on mainland China CRE. Reported operating expenses rose 10% to $36.4 billion, mainly because of $3.0 billion of notable items. On HSBC's target basis, costs rose 3% to $33.5 billion, in line with guidance. The simplification programme had actioned $1.2 billion of annualised savings by end-2025. The share of profit from associates fell to $1.9 billion after the BoCom impairment. The effective tax rate was 22.7%. **Balance sheet, capital and returns.** Customer loans rose $57.7 billion to $988 billion, mainly UK mortgages and commercial lending, and customer accounts rose $131.9 billion to $1.79 trillion. Both increases include currency translation. The CET1 ratio was steady at 14.9%, the LCR was 137% and the NSFR 143%. Dividends for 2025 totalled $0.75 per share, or $12.9 billion. With $6 billion of buy-backs, total distributions came to $18.9 billion. Buy-backs were then paused until CET1 returned to the target range, because the Hang Seng privatisation took a net 110bps off CET1 in January 2026. **Guidance given in February 2026.** For 2026: banking NII of at least $45 billion, expected credit losses of around 40bps of average loans, and target-basis cost growth of about 1%. Over the medium term, HSBC targets 30–40bps of credit losses. --- ## Current period — first half and second quarter of 2026 *Source: Interim Report 2026 on Form 6-K for the half-year ended 30 June 2026, filed 4 August 2026, accession 0001089113-26-000025.* **First half.** Profit before tax rose 23% to $19.5 billion, and profit after tax rose 23% to $15.3 billion. Part of the increase reflects the absence of the 1H25 BoCom losses: notable items were a net $2.2 billion less adverse than a year earlier. Excluding notable items and at constant currency, profit before tax rose 6% to $20.4 billion. Revenue rose 11% to $37.7 billion. Excluding notable items and at constant currency, revenue rose 6%, to $38.2 billion. The drivers were: - banking NII, up $1.6 billion to $22.9 billion on deposit growth and structural-hedge reinvestment; - Wealth fee and other income, up 20% to $5.5 billion, especially investment distribution in IWPB and Hong Kong and insurance new business in Hong Kong; - Wholesale Transaction Banking, up 6% to $6.1 billion; - a one-off $0.2 billion gain on a property sale. The wind-down of M&A and equity capital markets advisory in the UK, Europe and the US reduced investment-banking fees. The net interest margin rose 4bps to 1.61%. Expected credit losses rose to $2.4 billion, or 47bps annualised. They included a $0.4 billion stage 3 charge on a fraud-related, secondary securitisation exposure to a UK financial sponsor in CIB, $0.2 billion on Hong Kong CRE, and allowances for the Middle East conflict. Operating expenses rose 2% to $17.4 billion, and the cost-efficiency ratio improved to 46.2% from 49.9%. Annualised RoTE was 18.2% reported and 19.1% excluding notable items. Basic EPS was $0.85, up from $0.65. **Second quarter.** Profit before tax rose 60% to $10.1 billion and revenue rose 16% to $19.1 billion. The comparison is flattered because 2Q25 had carried the $2.1 billion of BoCom losses. Banking NII rose $0.9 billion to $11.6 billion. Expected credit losses were stable at $1.1 billion, and operating expenses fell 2% to $8.7 billion. **Businesses (1H26, constant currency).** Every business grew revenue. The figures are profit before tax, with annualised RoTE excluding notable items in brackets. - **Hong Kong:** $5.1 billion, up 14% (44.3%). Revenue was up 6%, Wealth fees up 22%, and credit losses fell to $0.5 billion from $0.9 billion. - **UK:** $3.3 billion, up 3% (20.8%). Loans were up 7% and banking NII up 6%, but credit losses rose to $0.5 billion from $0.3 billion. - **CIB:** $7.3 billion, up 7% (18.9%). Revenue was up 5% and deposits up 16%. Credit losses almost tripled to $0.9 billion, including the securitisation fraud case. - **IWPB:** $2.6 billion, up 22% (27.4%). Wealth fees were up 18% and new-business contractual service margin up 49%. - **Corporate Centre:** a profit of $1.2 billion, against a $0.7 billion loss in 1H25, reflecting the absence of the BoCom losses. **Balance sheet and capital.** Customer loans grew $40 billion at constant currency to $1.02 trillion, the growth led by Hong Kong. Customer accounts grew $56 billion to $1.83 trillion, mostly in CIB. Total assets reached $3.44 trillion. The CET1 ratio fell to 14.1% from 14.9%, reflecting the Hang Seng Bank privatisation, dividends and higher risk-weighted assets ($906 billion), partly offset by profits. That puts it back inside the 14%–14.5% target range. The LCR was 134%. Tangible net asset value per share was $9.36. HSBC Holdings' distributable reserves fell to $36.2 billion after $10.0 billion of distributions. The Board declared a second interim dividend of $0.10 per share, the same as the first, and resumed buy-backs with a programme of up to $1 billion. Buy-backs had been paused for three quarters. **Outlook (as of the interim report).** HSBC reaffirmed its 2026–2028 targets. Guidance for 2026 changed as follows: - banking NII: raised to at least $46 billion, from "around $46 billion" (February's annual report had said at least $45 billion); - expected credit losses: kept at around 45bps of average loans (February had said around 40bps); - target-basis cost growth: kept at about 1%, though extra performance-related pay could push it modestly higher; - CET1: kept within 14%–14.5%. The simplification programme had actioned $1.7 billion of annualised savings by mid-2026, for $1.4 billion of restructuring costs. The savings goal was raised from $1.5 billion to about $2.0 billion by end-2026, within the original $1.8 billion restructuring budget. **Portfolio reshaping in the half.** In the first half HSBC completed four exits: - the UK life insurer HSBC Life (UK), sold to Chesnara on 30 January (a $0.2 billion reserve-recycling loss); - its South African business, transferred to FirstRand Bank on 27 February; - Sri Lankan retail banking, sold to Nations Trust Bank on 30 April; - the wind-down of Bangladesh retail banking. It also agreed one new sale: Indonesian retail banking goes to PT Bank OCBC NISP under an agreement of 4 May 2026, with a pre-tax gain of up to $0.4 billion expected in 1H27. The sale of HSBC's 70.03% stake in HSBC Bank Malta to CrediaBank was agreed in December 2025; the business met the held-for-sale criteria in the first quarter of 2026, which led to a $0.3 billion loss, and completion is expected in 1H27. A strategic review of the retail and domestic small and mid-sized corporate business in Türkiye has begun; the international wholesale business there is not part of it. Other developments in the half: - HSBC was granted a stablecoin issuer licence in Hong Kong and plans to issue in the second half. - It expanded tokenised deposits to six markets, including the US and the UAE. - On litigation, after the half ended, in July 2026, Luxembourg's Court of Appeal rejected HSBC Securities Services Luxembourg's second appeal on Herald's securities-restitution claim. A further appeal to the Court of Cassation remains possible. - In May 2026, HSBC Private Bank (Suisse) was placed under formal examination in the French money-laundering investigation. --- ## Subsequent events *Source: Interim Report 2026 on Form 6-K, Note 16 "Events after the balance sheet date", accession 0001089113-26-000025.* The interim report discloses the following events after 30 June 2026. For the disposals, HSBC states the expected gain or loss and the size of the business, not a purchase price. - **Uruguay sale completed (10 July 2026).** HSBC Latin America Holdings (UK) completed the sale of HSBC Bank (Uruguay) S.A. to a subsidiary of BTG Pactual Holding SA. At 30 June the business held $2.3 billion of assets and $2.1 billion of liabilities as held for sale. Only immaterial reserve losses were recycled on completion. - **HSBC Life Singapore to Allianz (agreed 24 July 2026).** HSBC Insurance (Asia Pacific) Holdings agreed to sell HSBC Life (Singapore) Pte. Ltd to Allianz Asia Holdings Pte. Ltd. HSBC expects a pre-tax gain of about $1.8 billion at Group level, net of transaction and migration costs, goodwill write-off and currency-reserve recycling. The gain should be recognised mostly on completion, expected in 1H27 and subject to regulatory approval. At 30 June, $10.7 billion of assets and $10.4 billion of liabilities, including $1.4 billion of insurance contractual service margin, were classified as held for sale. - **Australian retail exit (agreed 31 July 2026).** HSBC Bank Australia agreed to sell its home and personal loan portfolio, $25.3 billion of assets at 30 June, to Virgo BidCo Pty Ltd, which is owned by funds managed by affiliates of Blackstone Inc. Completion is expected in 1H27, subject to regulatory and competition approvals, with an immaterial loss. The rest of the Australian retail bank will be wound down over about 18 months. CIB, Asset Management and Private Banking will move into the Sydney branch of The Hongkong and Shanghai Banking Corporation. HSBC expects $0.3 billion of restructuring costs and write-offs. At 30 June there were also $0.3 billion of currency-translation losses, which are expected to be recycled through the income statement. - **Egyptian retail sale (agreed 2 August 2026).** HSBC Bank Egypt agreed to sell its retail banking business to Emirates NBD Egypt, a subsidiary of Emirates NBD Bank PJSC. HSBC expects a pre-tax gain of about $0.3 billion when the deal completes in 2H27, subject to regulatory approval. The business holds $0.4 billion of assets and $2.8 billion of liabilities and is expected to be classified as held for sale in the third quarter of 2026. - **Distributions (4 August 2026).** The Board approved a second interim dividend for 2026 of $0.10 per share and announced a share buy-back of up to $1 billion, to be completed by the third-quarter 2026 results.