By Selena Li and Lawrence White
HONG KONG/LONDON (Reuters) -HSBC Holdings reported a 26% slide in first-half pretax profit on Wednesday, missing analyst estimates, as impairments from its investment in Bank of Communications and exposure to Hong Kong real estate weighed.
Europe’s largest bank posted a pretax profit of $15.8 billion for the first six months of this year, versus $21.6 billion a year earlier.
The result compared with the $16.5 billion average of broker estimates compiled by HSBC.
The sharper-than-expected drop in HSBC’s earnings showed the challenge ahead for CEO Georges Elhedery, as the bank racked up losses in China where it has increasingly pinned its plans for growth in recent years after shrinking in Western markets.
The lender took a further $2.1 billion hit from its stake in Bank of Communications, following a $3 billion impairment it took in February 2024 amid mounting bad loans in China.
Expected credit losses grew by $900 million compared to the first half of last year to $1.9 billion, the bank said, partly due to its exposure to Hong Kong’s troubled commercial real estate sector.
China’s property market, once a key growth driver for the world’s second-largest economy, has been in a multi-year tailspin despite repeated government attempts to revive weak consumer demand, which left losses on domestic lenders’ loan books.
A sluggish property market in Hong Kong could continue to weigh on asset quality of banks operating in Hong Kong, according to Citi’s analysts. Some small property developers are already in financial difficulties and continued declines in property prices may increase the need for provisions, they added.
HSBC also said the impact of U.S. President Donald Trump’s trade tariffs could cause it to miss its profitability target of a mid-teens return on tangible equity in future years, in a scenario where the economy deteriorates and central banks slash policy rates.
The lender, with a market value of $225 billion, announced a new share buyback worth up to $3 billion, on top of a $3 billion buyback programme announced earlier this year.
The bank said it would pay an interim dividend of 10 cents a share – its second dividend payment in 2025 following 10 cents announced at the end of the previous quarter.
(Reporting by Selena Li in Hong Kong and Lawrence White in London; Editing by Muralikumar Anantharaman)
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