Pre-tax profits at Europe’s largest lender HSBC (HSBA.L) plunged 29% year-on-year to $6.3bn in its second quarter, mostly on account of impairment charges related to its investment in China's Bank of Communications (601328.SS) and exposure to Hong Kong real estate.

The bank recorded a $2.1bn impairment on its long-standing investment in Bank of Communications, adding to a $3bn charge taken earlier this year. The latest writedown includes a $1.1bn loss from a private placement of shares by the Chinese state-owned bank that diluted HSBC’s stake.

Expected credit losses rose by $900m year-on-year to $1.9bn, due in part to mounting stress in Hong Kong’s property sector.

LSE - Delayed Quote•USD

(HSBA.L)

Follow View Quote Details

970.00

-

+(1.06%)

At close: July 29 at 6:56:27 PM GMT+1  Advanced Chart

Group CEO Georges Elhedery also cited rising macroeconomic risks. “Structural challenges to the global economy have caused uncertainty and market volatility,” he said, referencing “broad-based tariffs” and “fiscal vulnerabilities.”

He added: “This is complicating the inflation and interest rate outlook, creating greater uncertainty. Even before tariffs take effect, trade disruptions are reshaping the economic landscape.”

Operating expenses rose 10% compared with the same quarter last year, driven by restructuring and higher investment in technology, the bank said. Net interest income — the difference between what the bank earns on loans and pays on deposits — was $8.5bn.

Revenue for the first half of 2025 fell $3.2bn to $34.1bn, primarily reflecting the group’s exit from its operations in Canada and Argentina.

HSBC reported a pre-tax profit of $15.8bn for the first six months of the year, down 26%. Despite the earnings drop, the bank announced a new $3bn share buyback, which comes in addition to a $3bn program launched earlier this year. It declared a second interim dividend of 10 cents per share, matching the payout in the previous quarter.

Return on average tangible equity stood at 14.7% for the first half, though HSBC cautioned that global economic conditions could affect future profitability.

“While we would expect the direct impact from tariffs to have a relatively modest impact on our revenue, the broader macroeconomic deterioration may see RoTE excluding notable items fall outside of our mid-teens targeted range in future years,” the bank said.

HSBC warned that lending demand would probably remain muted in the second half of the year, but said it expects further growth in its wealth management division. The lender also forecast a $1.4bn loss in the fourth quarter, tied to the planned sale of a French mortgage portfolio to Rothesay and CCF.

Download the Yahoo Finance app, available for Apple and Android.

View Comments