Industrial Securities has issued a research report upgrading its rating on HSBC Holdings (00005) to "Buy." Based on the company's financial report release date forecasts, net interest income from the banking business is projected to reach no less than $45 billion by 2026. The average return on tangible equity for 2026-2028 is expected to be no lower than 17%. The company anticipates that the expected credit loss provisions as a percentage of the average total loan amount will be approximately 40 basis points in 2026. HSBC plans to maintain the common equity tier 1 capital ratio within the medium-term target range of 14% to 14.5%. The privatization transaction of Hang Seng Bank is projected to have a net impact of 110 basis points on common equity and capital as of January 2026. The company targets annual revenue growth for 2026-2028, with the target dividend payout ratio remaining at 50%.

Key points from Industrial Securities are as follows:

Full Year 2025: Net Interest Income and Wealth Management Business Were Operational Highlights

1) Strong Performance Growth: In 2025, the company's reported profit before tax decreased by $2.4 billion to $29.9 billion compared to 2024. Profit after tax was $23.1 billion, a decrease of $1.9 billion from 2024. Excluding notable items at constant exchange rates, profit before tax increased by $2.4 billion to $36.6 billion compared to 2024. During the period, the International Wealth Management and Premier business, the wealth management business under the Hong Kong operation, and the wholesale transaction banking business under the Corporate and Institutional Banking segment performed strongly.

2) Net Interest Income Growth, Net Interest Margin Rises Year-on-Year: In 2025, the company's net interest income was $34.8 billion, an increase of $2.1 billion from 2024. Benefiting from the positive impact of reinvesting structural hedges at higher yields, the net interest margin for the period was 1.59%, up 3 basis points year-on-year.

3) ECL in Line with Expectations: In 2025, the company's provision for credit losses included provisions related to commercial real estate in Hong Kong ($700 million) and commercial real estate in mainland China ($200 million). Expected credit losses were $3.9 billion, an increase of $400 million from 2024. Expected credit losses as a percentage of average gross loans were 39 basis points, including loans classified as held for sale. Operating expenses for the period were $36.4 billion, an increase of 10% from 2024.

4) The company's common equity tier 1 capital ratio for 2025 was 14.9%. Excluding notable items, the average return on tangible equity for 2025 was 17.2%, an increase of 1.6 percentage points from 2024.

Key Operating Data for Q4 2025

During the quarter, driven by growth in net interest income from the banking business and increased fees and other income from the wealth management business, the company's revenue grew 42% to $16.4 billion. Expected credit losses decreased by $500 million to $900 million. In Q4 2025, the company's reported profit before tax increased by $4.5 billion to $6.8 billion, and reported profit after tax was $5.2 billion.

Risk factors include narrowing interest margins due to changes in the global economic environment; slower-than-expected business development in the Asia-Pacific region; significant declines in European and North American operations; a substantial deterioration in asset quality in Europe; and general operational risks.