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FINANCIALS: HSBC: Positive Results, Upgraded Guidance; Supportive To Spreds

FINANCIALS

HSBC (HSBC: A3/A-/A+) results look good. Beats on revenues and loan losses, improved revenue and loan loss guidance should be supportive. Equity payouts are similar to before. Spreads have done little ahead of results, StanChart tightened yesterday on similar results, so we can see these as supportive.

  • Credit stats: loan losses dropped to 15bp (from 29bp in 1Q24, cons: mid-30s) driven by UK model assumption changes (positive), some EM sovereign upgrades (like StanChart) and a single big client release. So, some is relatively exceptional but FY24 guidance is still upgraded. Non-performers are 14bp higher (at 2.39%, driven by HK CRE), similar deterioration as 1Q24 rate. CET1 is 20bp below consensus (at 15.0%). So, generally positive.
  • Revenues are 3% ahead of expectations (driven by the personal and investment banks), costs are marginally better, so that loan loss performance helps drive a 15% pre-tax beat.
  • Guidance is also being massaged higher; FY24 NII is upgraded a little, which adds 1-2% to consensus, we feel. Loan loss guidance is improved (to 30-40bp of charges, from c.40bp) and a new FY25 RoTE target is introduced (“mid-teens”, like FY24’s target).

Conf call is 0745 (London time) at: https://hsbc.zoom.us/webinar/register/WN_gxv5zpEVR9umOycupk1C8w 

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