HSBC Holdings Plc (HSBA.L): Thoughts Post 2Q Call - A Complicated Message

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HSBC Holdings Plc (HSBA.L): Thoughts Post 2Q Call - A Complicated Message

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04 Aug 2026 05:40:24 ET │ 12 pages

HSBC Holdings PLc (HSBA.L)

Thoughts Post 2Q Call - A Complicated Message

CITI'S TAKE

Buy HSBC results have met with a muted share price reaction, as we expected

in our initial reaction: 2Q26 Revenue Driven Beat & Improved NII Guide vs Price (04 Aug 26 08:24) £15.93

Lower Buyback & Some Cost Slippage. The conference call included clear Target price £16.40

guidance on capital return priorities (in order: dividend, organic growth, Expected share price 3.0% buybacks, inorganic growth) and helpful detail on impairments (especially return

on HK CRE), but the discussion on the revenue and cost outlook was far Expected dividend yield 4.7%

more nebulous. We appreciate the wish to reinvest in the franchise, and Expected total return 7.7%

think this makes complete strategic sense, but by not changing the

Market Cap £273,734M medium-term revenue and RoTE guide the risk we see is that consensus

US$367,666M now (incorrectly) bakes in a higher cost assumption without the

associated revenue benefits from the incremental investment plans in

2027.

Andrew Coombs, CFAAC

Making Sense of The Cost Message... - Firstly the FY26 cost base is now expected +44-20-7986-4053

to (potentially) have a modest uptick for higher variable compensation, which andrew.coombs@citi.com

should not necessarily come as a surprise based upon the revenue backdrop. Based Michael Zhang

on historical precedent and $3.9bn of variable comp paid last year, we'd therefore +852-2501-7607

expect an additional ~$0.2-0.3bn, taking the FY26 cost base to ~$34.4-34.5bn (vs michael.zhang@citi.com

consensus $34.3bn). Inflation and investment is currently running around ~5% and

Rajkumar Choudhary