HSBC may raise employee bonuses if strong momentum continues into H2

HSBC Holdings PLC could raise employee bonuses if it can sustain its estimates-beating performance for the remainder of the year.

"We recognize that the momentum in our business and the performance have been strong in the first half, specifically in the second quarter," HSBC CEO Georges Elhedery said during an Aug. 4 earnings call. "If we continue to see this momentum in the business carry on in the second half, we would certainly consider [recognizing] the contribution of our colleagues toward it."

The UK-headquartered, Asia-focused bank's second-quarter profit attributable to ordinary shareholders increased 67.9% year over year to $7.69 billion, topping the Visible Alpha consensus estimate of $7.36 billion. First-half attributable profit was $14.63 billion, beating the Visible Alpha consensus estimate of $14.33 billion.

Any decision on higher variable pay, which will be made at the end of the year, would result in only a "modest change" in total costs, according to CFO Pam Kaur. HSBC incurred $3.9 billion in variable pay costs in 2025, Kaur said.

HSBC said it was on track to report approximately 1% growth in operating expenses in 2026. It also increased its targeted organizational simplification savings to $2 billion from $1.5 billion, to be actioned by the end of 2026 and delivered in full in 2027.

HSBC upgraded its banking net interest income (NII) guidance for 2026 to at least $46 billion. The previous guidance was for approximately the same amount. Banking NII, which is HSBC's banking revenue directly impacted by interest rate changes, is adjusted primarily for the effects of funding trading and fair value activities reported in interest expense.

The bank is projected to report banking NII of $46.52 billion for 2026, according to Visible Alpha estimates.

Banking NII mainly drove an 7% increase in revenue, with growth from both loans and deposits. An uptick in the second quarter and a supportive rate environment give HSBC "a modest benefit for the rest of the year," Kaur said.

Elhedery also said loans in Hong Kong have increased after several quarters of slowdown or contraction.

The potentially higher variable pay and investment to capture revenue growth in 2027 should support modest consensus earnings revisions, factoring in the incremental $500 million in cost savings, Jefferies analysts said in a note.

HSBC announced a $1 billion share buyback, resuming repurchases for the first time in three quarters, following its announcement of the privatization of Hang Seng Bank in Hong Kong. The lender also declared a second interim dividend of 10 cents per share.

The bank's London-listed shares were down 1.6% at 10:45 am. The stock is up 31.9% year to date.