HSBC Performance

Against this background, we have begun a review of our interim financed emissions targets and associated policies as part of the annual review of our net zero transition plan that we referenced in our 3Q24 earnings release in October.

However, as we have set out in our net zero transition plan, we must acknowledge that our influence on the decarbonisation of individual companies and the industries and economies in which our customers operate has limits.

At the current pace of decarbonisation, a combination of the above factors has led to the transition being slower than envisaged by recent Paris-aligned net zero scenarios.

As we calibrate our approach for the latest context, we will seek to balance being ambitious on net zero while recognising present near-term global challenges, and the associated impact of the transition playing out differently across the regions and sectors we serve.

We set interim 2030 financed emissions targets.

In 2024, we disclosed interim 2030 targets for financed emissions for seven sectors as outlined on page 52.

With our continued focus on cost discipline, we managed cost growth on our target basis of around 5%, which was in line with our targeted cost growth.

Operating expenses were $1.5bn or 5% higher on a constant currency basis, primarily reflecting higher spend and investment in technology and inflationary impacts, partly offset by continued cost discipline.

We retain a Group-wide focus on cost discipline.

We are targeting growth in target basis operating expenses of approximately 3% in 2025 compared with 2024.

Our cost target includes the impact of simplification-related savings associated with our announced reorganisation, which aims to generate approximately $0.3bn of cost reductions in 2025, with a commitment to an annualised reduction of $1.5bn in our cost base expected by the end of 2026.

To deliver these reductions, we plan to incur severance and other up-front costs of $1.8bn over 2025 and 2026, which will be classified as notable items.

This strong performance enabled us to announce $26.9 billion in returns to our shareholders through dividends and share buy-backs, which we expect to remain central to our strategy.

Our business model is designed to be highly capital generative.

Our primary use of capital generation is to pay an ordinary dividend of 50% of profit attributable to ordinary shareholders, excluding material notable items and related impacts (our dividend payout ratio target basis1).

Should organic growth in any given year require less incremental capital than the Group has retained after paying ordinary dividends to our shareholders, we plan to consider further share buy-backs.

Our financial performance indicators demonstrate our continued focus on the delivery of sustainable returns for our shareholders.

They also provide insight into the performance that has driven the outcomes of our financial targets.

The number of employees expressed in full-time equivalent staff (‘FTE’) at 31 December 2024 was 211,304, a decrease of 9,557 compared with 31 December 2023, primarily reflecting the completion of the sales of our banking business in Canada, our retail banking operations in France and our business in Argentina.

This was partly offset by a reduction in assets held for sale, notably following the completion of our disposals in France, Canada and Argentina.

Optimising cost and capital allocation, we completed the sale of our businesses in Canada, Russia, Argentina, and Armenia, as well as our retail banking operations in France and Mauritius.

We announced the planned sale of our business in South Africa and of our private banking business in Germany, as well as the planned sale of our life insurance business in France.

These were partly offset by a $4.8bn gain on the sale of our banking business in Canada, inclusive of fair value gains on related hedging and recycling of related reserves.

In 2024, these included a loss on disposal of $1.0bn, as well as foreign currency and other reserve losses of $5.2bn, following the disposal of our business in Argentina.

Supporting the transition to net zero is a key priority for HSBC.

In October 2020, we announced our ambition to become a net zero bank by 2050.

We believe supporting our customers’ transition both benefits their business and helps generate long-term financial returns for our shareholders.

The Board is responsible for setting the Group’s ESG strategy and takes a direct and active role in monitoring the Group’s progress towards its ESG ambitions.

In January 2024, the Group published its first net zero transition plan which outlines the proposed steps for delivering the Group’s ambition to align its financing portfolio to net zero by 2050.

In recognition of the complexity of the sustainability landscape and real-world transition challenges, the Board established the SWG, comprised of five non-executive Directors and supported by members of executive management, including the Group CEO and Group CFO.

Our annual employee survey showed that 85% of colleagues have trust in their direct manager.

Our inclusion index measures our colleagues’ sense of belonging and psychological safety within the organisation, and in 2024 this remained unchanged at 78%.

We have an ambition to achieve a 35% representation of women in senior leadership roles (classified as those at band 3 and above in our global career band structure) by 20251.

We remain on track, having achieved 34.6% in 2024.

We have an ambition to increase our Black heritage senior leader representation in both the UK and US combined to 3.4% by 20251.

In 2024 we maintained our position at 3.0%.

We are focused on growth opportunities within our strategy that play to our strengths, while maintaining tight cost discipline and continuing to invest in growth and efficiency.

In CIB, these include further expanding our international network businesses, notably transaction banking.

In IWPB, we intend to particularly focus on building our successful wealth business, especially in Asia.

In Hong Kong, we intend to support continued growth in non-resident customer numbers and will seek to build on our strong SME proposition.

In the UK, we see the opportunity to continue building our mortgage franchise and build share in SME banking.

We recognise that the greater our understanding of our customers’ needs, the better we can help support them to achieve their financial aims and succeed in our purpose and strategy.

Continued engagement with customers around the world helped to further the Board’s understanding of their respective needs, including how the Group can support customers to achieve their varied goals, including during their transition to net zero.

Customer surveys provided insights into how the Group can drive meaningful improvements in outcomes for customers.

Reports from management highlight where there are opportunities for innovation and collaboration with our customers and support the Board’s oversight of Group activities to ensure such innovations are aligned with Group risk appetite and strategic objectives.

The increase reflected higher spend and investment in technology and inflationary impacts, while performance-related pay remained stable.

Operating expenses of $15.2bn were 6% higher on a constant currency basis, reflecting continued investments in Wealth in Asia, higher spend and investment in technology, higher performance-related pay and from the impact of higher inflation.

The increase reflected hyperinflationary impacts in Argentina, incremental costs in IVB following the acquisition of SVB UK, higher spend and investment in technology, and inflationary impacts.

Operating expenses of $10.2bn increased by $0.4bn or 4% on a constant currency basis, due to the impact of inflation and higher spend and investment in technology, partly mitigated by continued cost discipline.

We want to continue to be a positive place to work and build careers, with the success of the Group’s strategy dependent upon having motivated people with the expertise and skills required to deliver it.

Meeting with colleagues across jurisdictions allowed Directors to hear first-hand views on important issues, including inclusion matters, talent development and the employee experience.

Workforce engagements and interactions helped to ensure continued connectivity between the Board and the workforce, inform Board discussions and decision making and enhance understanding of the Group culture across different geographies.

Employee engagement with Group strategy is monitored through annual Snapshot surveys, the results of which are presented to the Board.

To help create long-term value for all stakeholders, we focus on fostering inclusion and building resilience for our colleagues, our customers and the communities we operate within.

For colleagues, we focus on creating an inclusive, healthy and rewarding environment as this helps us to attract, develop and retain the best talent, and we support their resilience through access to well-being and learning resources.

We strive to provide an inclusive and accessible banking experience for our customers.

In 2024 we updated our global philanthropy strategy to align with our ESG areas of focus: ‘transition to net zero’; and ‘building inclusion and resilience’, allowing us to work alongside the communities we operate within to help create change.

We are transforming our operations to enhance customer experiences through the use of artificial intelligence (‘AI’) and automation to help deliver faster, personalised and more seamless services.

By harnessing AI capabilities, HSBC aims to improve customer service through AI supported mobile apps and strengthened contact centre capabilities, as well as improving process efficiency in onboarding, know-your-customer, and credit applications.

We are committed to the responsible use of AI, ensuring that our initiatives align with industry and regulatory standards and best practices.

Our governance frameworks aim to enable robust prioritisation of use cases whilst mitigating potential risk associated with AI deployment.