CICC has released a research report stating that, considering the slowdown in HSBC Holdings' (00005) non-interest income growth, it has lowered its 2025E revenue forecast by 1.3% to $67.2 billion and net profit attributable to ordinary shareholders by 3.7% to $21.1 billion. However, due to the resilience of net interest margins, the firm raised its 2026E revenue forecast by 4.0% to $71.7 billion and net profit attributable to ordinary shareholders by 11.2% to $27.1 billion.

HSBC currently trades at 1.4x/1.3x 2025E/2026E P/B. Based on revised earnings forecasts and market risk preferences, CICC maintains its target price of HK$111.9, implying 1.4x/1.3x 2025E/2026E P/B and 5% upside potential, with an "Outperform" rating. Key highlights from CICC's report include:

**3Q25 Earnings Beat Expectations** HSBC reported 3Q25 adjusted revenue of $17.9 billion, up 4% YoY. Profit attributable to shareholders rose 1% YoY to $6.2 billion, exceeding both CICC and market expectations, driven by stronger-than-expected net interest income and wealth management revenue.

**Net Interest Income Outperforms** Banking NII grew 3% QoQ and 2% YoY in 3Q25, surpassing forecasts due to faster deposit growth, which boosted interest-earning assets (+6% YoY). Net interest margin (NIM) expanded 2bps QoQ to 1.98%, supported by a rebound in HIBOR since early August. HSBC raised its 2025 Banking NII guidance from "around $42 billion" to "$43 billion or better."

**Non-Interest Income Growth Slows to 8% YoY** While slower than the previous 20%+ growth, non-interest income remained robust. The deceleration was attributed to a 4% YoY decline in corporate transaction banking fees, particularly FX-related income (-11% YoY) amid subdued market volatility. Securities services revenue rose 15% YoY, benefiting from strong capital markets in Asia and the Middle East, while global trade and payments grew 1% and 2%, respectively.

**Wealth Management Revenue Remains Strong** Wealth management income surged 29% YoY in 3Q25, driven by Hong Kong's equity market recovery. Fund distribution income rose 39% YoY, and insurance revenue grew 46% YoY. AUM growth stemmed from new client acquisitions and favorable investment returns.

**Effective Cost Control** Operating expenses increased 3.5% YoY to $8.4 billion in 3Q25, with a cumulative rise of 3% for 1Q-3Q25. The growth was slightly below revenue growth (4%), aligning with HSBC's full-year cost guidance of ~3%. The bank has saved $1 billion YTD through operational simplification, with an additional $400 million expected in 4Q25.

**Stable Credit Costs** Provisions totaled $1 billion in 3Q25, up 2% YoY but down 5% QoQ. Credit costs stood at 41bps, in line with guidance. HSBC noted improving stability in Hong Kong's property market, with commercial real estate exposure limited to ~4% of total loans.

**ROTE Guidance Raised; Buyback Pause as Expected** HSBC upgraded its 2025 ROTE target to "above 15%" on higher NII and wealth management income. The 2026-27 ROTE target remains ~15%, though CICC expects it to exceed this level. The quarterly dividend of $0.10 per share was unchanged YoY/QoQ. The buyback suspension, announced during the Hang Seng Bank acquisition, was anticipated. HSBC reiterated the deal aligns with its strategic goals and creates value beyond share repurchases.

**Attractive Shareholder Returns** As of October 28, 2025, HSBC offers a 4Q25-3Q26 dividend yield of ~5.5%. Assuming buybacks resume in the fourth quarter ($2-3 billion), total shareholder return is projected at 6.4%-6.8% over the next four quarters.

**Risks**: Potential asset quality deterioration in Hong Kong commercial real estate or UK retail exposures, and steeper-than-expected overseas rate cuts.