HSBC Reports 26% Profit Drop Amid China Bad Debts, Global Restructuring

HSBC, Europe's largest lender, reported a 26% drop in pre-tax profits to $15.8 billion in the first half of 2025, missing market expectations largely due to a $2.1 billion write-down related to its investment in China's Bank of Communications amid rising bad loans and a struggling Chinese property market. CEO George Elhedery attributed the profit decline to structural economic challenges, market volatility, fiscal vulnerabilities, and broad-based tariffs, while also noting a 10% increase in operating expenses driven by restructuring and technology investments. Despite these setbacks, HSBC's wealth management division showed strong growth, and the bank remains focused on cost-saving measures, targeting up to $300 million in savings in 2025 and $1.5 billion by the end of 2026. The bank is also undertaking a global restructuring, including winding down retail operations in select countries, while reassuring investors that impairments in China will not affect dividend payouts. HSBC's shares fell following the earnings release, reflecting investor concerns over the impact of Chinese exposures and broader economic uncertainties. Overall, the bank faces significant credit losses and uncertainty in interest rates and inflation, but maintains a strategic focus on managing tariff impacts and expanding wealth and private banking services.