HSBC Performance

This reflected lower operations costs, which were broadly offset by increases from planned higher spend on technology, including the development of our Wealth proposition, and the impact of inflation.

The increase primarily reflected planned higher investment spend in technology, including on operational resilience.

Cost growth also reflected planned higher spend and investment in technology, and inflationary impacts.

Cost growth also reflected planned spend and investment in technology, higher performance-related pay and the impacts of inflation, partly offset by reductions related to our business disposals and the benefits of our organisational simplification.

This increase primarily reflected higher planned spend and investment in technology, higher performance-related pay and the impact of inflation, partly offset by the benefits of our organisational simplification.

The growth primarily reflected continued investments in Wealth, planned higher spend and investment in technology, and the impact of inflation.

Exposure to financial risk arises from: – market risk affecting the fair values of financial assets or their future cash flows; – credit risk; and – liquidity risk of entities being unable to make payments to policyholders as they fall due.

Financial risk is: – measured for market risk, in terms of fluctuation in key financial reporting metrics; for credit risk, in terms of the market value that could be lost if a counterparty fails to make repayments; and for liquidity risk, in terms of internal metrics including stressed operational cash flow projections; – monitored through a framework of approved limits and delegated authorities; and – managed through a risk control framework, which seeks to outline clear and consistent policies, principles and guidance.

This includes using product design, asset liability matching and bonus rates.

Insurance risk is the risk that, over time, the cost of insurance policies written, including claims and benefits, may exceed the total amount of premiums and investment income received.

The cost of claims and benefits can be influenced by many factors, including mortality and morbidity experience, as well as lapse and surrender rates.

This includes using product design, underwriting, reinsurance and claims-handling procedures.

Data privacy is regularly monitored at multiple governance forums, including at Board level, providing senior executive oversight on privacy risk and global programmes.

We regularly provide employees with training and awareness sessions on data privacy and security, offering both mandatory and supplementary sessions as required.

We provide transparency to our customers, employees and other stakeholders regarding processing of personal data and their rights.

Our Global Internal Audit function independently assures whether our data privacy risk management approach is effectively designed and operational.

We continue to review and implement industry best practices for data privacy and security, working closely with our data protection officers, industry bodies, and research institutions.

We have established data privacy governance structures and continue to embed accountability across all businesses and functions.

Operating expenses of $5.5bn increased by $0.4bn or 8%, on a constant currency basis, including restructuring and other related costs associated with our organisational simplification of $0.1bn.

The increase reflected the impact of notable items of $1.0bn, including restructuring and other related costs associated with our organisational simplification of $0.3bn, legal provisions of $0.3bn, and costs associated with the wind-down of M&A and ECM activities in the UK, Europe and the US.

In 2025, notable items included dilution and impairment losses of $2.1bn related to our associate Bank of Communications Co., Limited (‘BoCom‘), reserve recycling losses of $1.5bn following the completion of the sale of our French retained portfolio of home and certain other loans, legal provisions of $1.4bn and restructuring and other related costs associated with our organisational simplification of $1.0bn.

Indeed, we are keeping to our committed objective of delivering $1.5bn of organisational simplification savings and expect to have taken the relevant actions to achieve it by the end of June 2026, which is six months earlier than planned.

Operating expenses of $1.2bn increased by $1.5bn on a constant currency basis, primarily reflecting a legal provision of $1.1bn and a rise in restructuring and other related costs associated with our organisational simplification of $0.4bn.

ECL of $1.5bn increased by $0.4bn compared with 2024, on a constant currency basis, including charges in both periods related to the Hong Kong CRE sector.

In 2025, the increased charge in this sector reflected higher allowances for new defaulted exposures, the impact of an over-supply of non-residential properties that has put continued downward pressure on rental and capital values, and updates to our models used for ECL calculations.

ECL were $3.9bn, an increase of $0.4bn compared with 2024, including charges in both periods related to the commercial real estate (‘CRE’) sectors in Hong Kong and mainland China.

In 2025, the charge in this sector in Hong Kong of $0.7bn (2024: $0.1bn) reflected higher allowances for new defaulted exposures, the impact of an over- supply of non-residential properties that has put continued downward pressure on rental and capital values, and updates to our models used for ECL calculations.

The 2025 charge in the mainland China CRE sector was $0.2bn (2024: $0.4bn).

Over a long-term horizon, we assess chronic physical risks using the Current Commitments and Downside Physical Risk scenarios to capture the gradual evolution of physical climate impacts.

In the most likely Current Commitments scenario, chronic physical risks are expected to increase slowly over time with ECL estimated to be less than 5% higher relative to the counterfactual scenario by 2040.

Our portfolio in Hong Kong, which represents our largest CRE portfolio, is primarily exposed to flooding risks, including coastal inundation and tropical cyclones.

In France, the principal physical risks are coastal inundation from storm- driven tidal surges and riverine flooding due to overflowing river banks.

This year, we also analysed our UAE portfolio as part of a regulatory exercise by the Central Bank of the UAE, focusing on physical risks.

HSBC does not make any political donations or incur political expenditure within the ordinary meaning of those words.

We have no intention of altering this policy.

To ensure that neither the Group nor any of its subsidiaries inadvertently breaches the UK Companies Act 2006, authority is sought from shareholders at the AGM to make political donations.

HSBC provides administrative support to two political action committees (’PACs’) in the US funded by voluntary political contributions by eligible employees.

We do not control the PACs, and all decisions regarding the amounts and recipients of contributions are directed by a voluntary Board Finance Committee, which consists of contributing eligible employees.

We continue to take actions across our organisation to support the implementation of our Net Zero Transition Plan.

We continue to focus on developing and maintaining the capabilities of our people as the sustainability landscape evolves.

This report provides key updates on our progress in 2025 and includes our annual TCFD reporting.

Against this broader landscape, we updated our Net Zero Transition Plan in November 2025, intensifying our efforts to be customer focused, commercial and agile.

Our Net Zero Transition Plan remains structured around our three core implementation pillars: supporting our customers, embedding net zero into the way we operate, and partnering for an enabling environment.

The threat of a significant cyber incident remains a concern for the Group and the broader financial sector.

We invest in business and technical controls to help prevent, detect and mitigate cyber threats.

Our ability to detect and respond to attacks through our round-the-clock security operations is intended to help reduce the impact of attacks.

In 2025, we continued to enhance our cybersecurity capabilities to help reduce the likelihood and impact of unauthorised access, security vulnerabilities being exploited, data leakage, third-party security exposure and advanced malware.

We focused on preparedness for emerging technology risks, such as AI and quantum computing.

We are closely monitoring these trends and have initiated targeted actions in each market to address the underlying causes.

We continue our commitment to drive accuracy over how we log and respond to customer feedback.

In our Private Bank, we received 593 complaints, a decrease of 54 compared with 2024, helped by the sale of our private bank in Germany.

Overall, our Private Bank resolved 578 complaints in 2025.

In 2025, we further strengthened our customer capabilities – the tools, skills, and processes that empower our teams to better understand, actively listen and improve the customer experience globally.

This included an adverse impact of $0.6bn from strategic transactions.

The net loss in notable items of $0.1bn in 2025 was primarily related to net losses on the disposals of our French and UK life insurance businesses, partly offset by gains on the sales of our private banking business in Germany and our retail operations in Bahrain.

In 2025, these included reserve recycling losses of $1.5bn following the completion of the sale of our French retained portfolio of home and certain other loans, legal provisions of $1.1bn, a $1.1bn loss from the dilution of our shareholding and a $1.0bn impairment to the carrying value of the Group’s interest in our associate BoCom.

In 2024, notable items included a net loss of $1.4bn related to business disposals in Canada and Argentina, as well as a $0.2bn loss related to the early redemption of legacy securities.

In 2025, the global economy showed resilience to unpredictable US trade policies, heightened geopolitical tensions and increased fiscal concerns in our major markets.

Trade and tariff policies are expected to remain a source of uncertainty for businesses and consumers.

Changes to tariff rates, including the application of sector-specific levies, may deter capital investment and consumer spending, disrupt supply chains and reduce global trade growth.

These include geopolitical and macroeconomic risks (including geopolitical tensions and their impact on sanctions, trade restrictions and tariff increases, and continued distressed Chinese economic activity), digitalisation and technological advances, financial crime risk and ESG risks, all of which have remained at heightened levels during 2025.