HSBC Interest Income Rises as Margin Compression Reverses
Full-year net interest income rose $2.1 billion to $34.8 billion as the margin expanded 3 bps.
The global banking and wealth-management group HSBC Holdings (HSBC) reported full-year net interest income of $34.8 billion for 2025, up $2.1 billion YoY and reversing the prior year’s $3.1 billion decline. Net interest margin expanded 3 bps to 1.59% as higher-yielding structural-hedge reinvestment outweighed continued deposit-margin compression. The margin had contracted 10 bps in 2024.
Wealth supplied the clearest fee-growth engine. Full-year Wealth fee and other income increased 24% to $9.4 billion, accelerating from 21% growth in 2024, as Investment Distribution and Insurance contributed to the gain. Corporate and Institutional Banking revenue rose 3% to $27.6 billion, including a 7% increase in fee and other income to $13.1 billion, with Wholesale Transaction Banking and foreign exchange among the group’s revenue-growth drivers.
Customer lending grew by $17.6 billion YoY on a constant-currency basis, up from $14 billion in 2024, led by UK mortgages and commercial lending. UK customer loans increased 6% to more than $300 billion. Customer-account growth slowed to $67.6 billion YoY from $75 billion, though deposits grew across every business and Hong Kong deposits increased 7% to more than $540 billion.
HSBC ended 2025 with a CET1 ratio of 14.9%, unchanged YoY as capital generation net of distributions offset higher risk-weighted assets. The ordinary dividend increased 14% on an underlying basis to $0.75 a share, while buybacks in respect of 2025 declined to $6 billion from $9 billion. HSBC will suspend further repurchases after the Hang Seng Bank privatization reduced CET1 by a net 110 bps in January 2026, until the ratio returns to its 14% to 14.5% target range.
Credit costs moved higher. Full-year expected credit losses increased $0.4 billion to $3.9 billion, lifting the charge rate to 39 bps of average gross loans, including held-for-sale balances, from 34 bps. Hong Kong commercial-real-estate ECL rose to $0.7 billion from $0.1 billion because of new defaults, property oversupply and model updates, while mainland China CRE ECL declined to $0.2 billion from $0.4 billion.
Reported operating expenses increased 10% to $36.4 billion from $33.0 billion, reflecting $3.0 billion of notable items that included $1.4 billion of legal provisions and $1.0 billion of simplification-related restructuring. Target-basis expense growth moderated to 3% from 5% in 2024, while the reported cost-efficiency ratio deteriorated to 53.4% from 50.2%. Group return on tangible equity excluding notable items improved 1.6 percentage points to 17.2%, although reported RoTE fell to 13.3% from 14.6%.
Full-year banking net interest income increased $0.3 billion to $44.1 billion, reversing a $0.4 billion decline in 2024. HSBC expects banking net interest income of at least $45 billion in 2026, above the roughly $42 billion outlook it had set for 2025, leaving structural-hedge reinvestment and deposit pricing central to the next year’s revenue path.