"Forecast" Brokers expect HSBC's pre-tax profit to drop by more than 5% in the third quarter, focusing on operational strategy and shareholder return guidance (Update)

AASTOCKS
2025.10.20 08:08

HSBC HOLDINGS (00005.HK) will announce its third-quarter results for this year next Tuesday (28th). Although benefiting from the rise in Hong Kong interbank offered rates since August this year, which helps alleviate some net interest margin pressure, the market expects impacts from "items to be noted" (non-recurring items, with the market estimating the need for dilution and impairment losses related to its associate company Bank of Communications (03328.HK), as Bank of Communications completed the issuance of A-shares in June, reducing HSBC's equity stake from 19.03% to 16%). According to a comprehensive forecast from five brokerages, HSBC's reported benchmark pre-tax profit for the third quarter of 2025 is expected to be between USD 6.264 billion and USD 8.1 billion, down 4.4% to 26.1% from USD 8.476 billion in the same period last year, with a median of USD 8.016 billion, a nearly 5.4% year-on-year decline.

According to the comprehensive forecast from five brokerages, HSBC's alternative performance measures (excluding items to be noted) fixed exchange rate income for the third quarter of 2025 is expected to be between USD 16.716 billion and USD 17.4 billion, down 2.9% to an increase of 1.1% from USD 17.209 billion in the same period last year, with a median of USD 17.206 billion, a year-on-year decline of 0.02%. The forecast for HSBC's dividend per share for the third quarter of 2025 from the five brokerages is uniformly set at USD 0.10 per share, unchanged year-on-year. Investors will focus on HSBC's net interest income and non-interest income growth performance, future dividends, Common Equity Tier 1 (CET1) capital ratio guidance, and pay attention to the expected credit loss situation related to the group's involvement in Hong Kong corporate real estate, as well as the latest operational guidance regarding the synergies brought by HSBC's plan to privatize Hang Seng Bank (00011.HK).

【Focus on Capital Return Guidance and New Operational Strategy】

Morgan Stanley predicts that HSBC's reported benchmark pre-tax profit will decline by 26.1% year-on-year to USD 6.264 billion, while the alternative measure excluding items to be noted will see fixed exchange rate income decline by 2.9% year-on-year to USD 16.716 billion. The bank's net interest income from banking operations is expected to be USD 10.476 billion, up 2% year-on-year (down 2% quarter-on-quarter), with expenses and other income at USD 6.24 billion, down 10% year-on-year (down 10% quarter-on-quarter). It is expected that the pre-tax loss from "items to be noted" will expand to USD 1.844 billion in the third quarter (compared to only USD 256 million in the third quarter of 2024), with a forecasted dividend of USD 0.10 per share. The bank indicated that the outlook for Hong Kong interbank offered rates is expected to lead to greater confidence in this year's bank net interest income outlook, and the market will focus on management's comments regarding next year's net interest income. The market will also pay attention to the net new cash and bank customers in Hong Kong's business. The bank also expects that expected credit impairments in Hong Kong commercial real estate will remain high, with related losses for the year expected to be 41 basis points.

Citi predicts that HSBC's reported benchmark pre-tax profit will decline by 5.4% year-on-year to USD 8.016 billion, while the alternative measure excluding items to be noted will see fixed exchange rate income remain nearly flat year-on-year at USD 17.206 billion. Citi noted that the average Hong Kong interbank offered rate for one month in the third quarter of this year fell by 14 basis points quarter-on-quarter, which is expected to pressure net interest income, but the overall net interest margin for the quarter is expected to remain at 1.95% Quarterly flat, supported by structural hedging. Non-net interest income is expected to benefit from a strong market, with wealth management business likely to record double-digit growth in the third quarter and beyond, supported by Hong Kong stock trading, fund sales, and insurance business. The bank expects HSBC's sale of its French residential mortgage portfolio losses to be recognized in the fourth quarter. The bank also forecasts HSBC's quarterly provision expense to be USD 1 billion, reflecting further confirmation of non-performing loans in Hong Kong's commercial real estate, and HSBC has raised its credit cost guidance to about 40 basis points. The bank indicated that commercial real estate loans in Hong Kong account for about 15% of local bank loans, but HSBC only accounts for 4% of total loans, with secured loans making up more than half of the related exposure.

JP Morgan expects HSBC's third-quarter reported benchmark pre-tax profit to decline 15.9% year-on-year to USD 7.127 billion, estimating a pre-tax loss of USD 800 million for "items to watch" in the third quarter. It is expected that fixed exchange rate income excluding items to watch will decline 2.2% year-on-year to USD 16.83 billion, with net interest income from banking operations expected to decline 2.9% year-on-year to USD 10.548 billion, estimating a net interest margin of 1.54%. Estimated fees and other income are expected to decline 0.9% year-on-year to USD 6.282 billion, with provision expenses increasing to USD 1.253 billion, and an estimated common equity tier 1 capital ratio of 14.7%. The bank expects the group's Hong Kong commercial real estate business to remain a focus, with credit costs (CoR) rising to 51 basis points in the third quarter, leading to a 9% year-on-year decline in pre-tax net profit. The key factors for performance changes compared to market expectations are trading bank fees and credit costs.

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According to a comprehensive forecast from five brokerages, HSBC's reported benchmark pre-tax profit for the third quarter of 2025 is expected to be between USD 6.264 billion and USD 8.1 billion, down 4.4% to 26.1% year-on-year from USD 8.476 billion in the same period last year, with a median of USD 8.016 billion, down nearly 5.4% year-on-year.

Brokerage│2025 Q3 Reported Benchmark Pre-tax Profit Forecast│Year-on-Year Change

Jefferies│USD 8.1 billion│-4.4%

Goldman Sachs│USD 8.091 billion│-4.5%

Citigroup│USD 8.016 billion│-5.4%

JP Morgan│USD 7.127 billion│-15.9%

Morgan Stanley│USD 6.264 billion│-26.1%

Based on the company's reported benchmark pre-tax profit of USD 8.476 billion for the same period last year.

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According to a comprehensive forecast from five brokerages, HSBC's alternative performance measures for the third quarter of 2025, excluding items to watch, are expected to have fixed exchange rate income between USD 16.716 billion and USD 17.4 billion, down 2.9% to up 1.1% year-on-year from USD 17.209 billion in the same period last year, with a median of USD 17.206 billion, down 0.02% year-on-year Brokerage │ Fixed exchange rate income forecast for Q3 2025 excluding items to be noted │ Year-on-year change

Friedman │ USD 17.4 billion │ +1.1%

Goldman Sachs │ USD 17.338 billion │ +0.7%

Citigroup │ USD 17.206 billion │ -0.02%

JP Morgan │ USD 16.83 billion │ -2.2%

Morgan Stanley │ USD 16.716 billion │ -2.9%

Based on the company's fixed exchange rate income of USD 17.209 billion for the same period last year excluding items to be noted.

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The five brokerages predict that HSBC's Q3 2025 dividend per share will be USD 0.10, unchanged year-on-year.

Brokerage │ Q3 2025 dividend per share forecast │ Year-on-year change

Morgan Stanley │ USD 0.10 │ Unchanged

Friedman │ USD 0.10 │ Unchanged

Goldman Sachs │ USD 0.10 │ Unchanged

Citigroup │ USD 0.10 │ Unchanged

JP Morgan │ USD 0.10 │ Unchanged

Based on the company's ordinary share dividend of USD 0.10 for the same period last year

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