HSBC Holdings reported a steeper-than-expected decline in first-half earnings, with pretax profit falling 26% to $15.8 billion, missing analysts’ forecast of $16.5 billion. The drop was driven by a $2.1 billion impairment on its stake in China’s Bank of Communications and rising credit losses in Hong Kong’s commercial real estate market.

This marks the second multibillion-dollar writedown on the Chinese investment in two years, following a $3 billion charge in 2024, as bad loans continue to mount in China’s banking sector. The disappointing results underline the challenges facing CEO Georges Elhedery, who took the helm last year and is overseeing a broad restructuring of the bank’s global operations.
Elhedery announced that HSBC would wind down its retail banking operations in Bangladesh during the second half of 2025 and is reviewing retail businesses in Australia, Indonesia, and Sri Lanka. These moves are part of a strategy to streamline the bank’s footprint and prioritize growth in Asia and the Middle East.
Second-quarter results were also below expectations, with profit before tax falling 29% to $6.3 billion, against consensus estimates of $6.99 billion. Revenue came in at $16.47 billion, slightly lower than the $16.67 billion forecast. Operating expenses rose by 10% year-on-year to $8.92 billion, primarily due to restructuring-related costs and increased investment in technology.
Credit losses and impairments weigh on bank outlook
HSBC reported expected credit losses of $1.07 billion in the quarter, up sharply from $346 million a year earlier, driven mainly by Hong Kong’s declining property market. The downturn in real estate continued to affect HSBC’s regional operations. Hang Seng Bank, which is 62% owned by HSBC, saw its shares fall nearly 7% after reporting a 224% year-on-year increase in real estate-related credit charges during the second quarter.
Analysts from Citigroup warned that a prolonged slump in Hong Kong property could weigh on asset quality for banks operating in the region. HSBC’s total expected credit losses rose by $900 million in the first half of 2025 to $1.9 billion. Despite the earnings pressure, HSBC announced a new share buyback of up to $3 billion and declared a second interim dividend of 10 cents per share.
HSBC cautious on loan demand and macro uncertainty
The bank said it returned $9.5 billion to shareholders in the first half of 2025 through dividends and share repurchases. However, shares dropped more than 4% in both London and Hong Kong following the earnings release. Looking ahead, HSBC reaffirmed its 2025 net interest income guidance at $42 billion and expects double-digit percentage annual growth in fees and other income from its wealth management business.
Operating expenses for the full year are forecast to rise by 3%, while cumulative restructuring costs are expected to reach $1.8 billion by the end of 2026. These efforts aim to generate annualized savings of $1.5 billion by 2027.
Elhedery cautioned that global trade tensions, broad-based tariffs, and fiscal vulnerabilities could impact the bank’s return on tangible equity. HSBC now expects this return could fall below its mid-teens target range in future years due to macroeconomic uncertainty and muted loan demand. – By Content Syndication Services.
