滙豐控股2025年全年業績直播
Key Takeaways (AI-Generated)
Financial Performance
- Group revenues grew 5% to $71 billion in 2025 on constant currency basis
- Profit before tax rose 7% to record $36.6 billion with 17.2% return on tangible equity
- Q4 revenues up 6% to $17.7 billion, profit before tax increased 17% to $8.6 billion
- Banking NII reached $44.1 billion full year, delivered 3% cost growth on target basis
Business Highlights
- Completed $13.7 billion Hang Seng Bank privatisation on January 26th, ahead of H1 2026 expectation
- Added 1.1 million new Hong Kong customers, reaching over 7 million total customers
- Attracted $80 billion net new invested assets in International Wealth and Premier Banking
- Launched 26-27 wealth centres in 2025, bringing total to 64 centres
Financial Guidance
- Target revenues growing year-on-year every year, rising to 5% in 2028 excluding notable items
- Target return on tangible equity of 17% or better from 2026 to 2028
- Full year 2026 Banking NII of at least $45 billion expected
- Cost growth constrained to 1% on target basis for 2026
Opportunities
- Consolidating powerhouse position in Asia-Middle East corridor as defining axis of global growth
- Scaling AI adoption across colleague empowerment, process reengineering, and customer experience enhancement
- Leveraging Hang Seng privatisation to drive $0.9 billion synergies by end 2028
- Capturing intra-Asia trade opportunities as Asia increasingly buys from Asia
Risks
- Sensitivity to interest rate timing and quantum, particularly US dollar and sterling cuts
- Wealth business dependent on market performance and volatility affecting transactional fee income
- Remaining pressures in Hong Kong commercial real estate, especially office sector with 17% vacancy
- ECL charge guidance at higher end of typical range reflecting economic outlook
Full Transcript (AI-Generated)
Operator
Welcome to the HSBC Holdings PLC Investor and Analyst presentation for the 2025 Annual results. We will begin in 2 minutes. Following the presentation, there will be an opportunity to ask questions. If you are joining via the Zoom link provided, please use the Raise Hand function in Zoom to register your interest in asking a question. You may raise your hand now or at any other time during the call, and Please ensure your camera is also turned on. If you are invited to ask a question, please accept the prompt to unmute your line. Please note that it will not be possible to ask a question if you are joining via the webcast link on the HSBC website.
Operator
Ladies and gentlemen, welcome to HSBC Holdings PLCS 2025 Annual Results Webinar for Investors and Analysts. For your information, today's webinar is being recorded. At this time, I will hand the call over to George El Hedary, Group CEO.
George El Hedary
Welcome everyone. Thank you for joining us as we celebrate the Year of the Horse Kong Hei Pho Choi. Our 2025 full year performance was strong. It was a year in which we performed, transformed and invested for growth. I will discuss our strong strategic progress today. First, the strong momentum in our 2025 performance. Second, the execution of our three strategic priorities where we are progressing at pace and with discipline. And 3rd, the new growth and return targets we are setting out today for 20/26/27 and 28.
So first, the full year earnings. My comments will exclude notable items and the comparisons will be year on year. On the constant currency basis, in 2025, there were $6.7 billion of notable items. You are already aware of these from prior quarters. They are set out on Appendix Slide 36. So first, we delivered strong earnings. Group revenues grew 5%. Profit before tax rose 7%, reaching a record $36.6 billion. Return on tangible equity was 17.2% and we delivered 3% cost growth on the target basis in 2025, in line with our cost target.
2nd, we delivered strong growth. Our deposit balances grew 5% with deposit growth in each of our four businesses. Our deposit base is a core strength. It contributes the lion's share of our banking Nii. We also grew fee and other income. In transaction banking. It grew by 4% elevated market activity, demonstrating the power of our deep international network, which gives access to 86% of World Trade flows alongside our product and service expertise in wealth. It grew by 24% reflecting our leadership position in the world's fastest growing wealth markets and continued investment in our products and proposition.
And we are investing for strategic long term growth. We completed the $13.7 billion privatisation of Hang Seng Bank. This bring together 255 years of history and heritage, combining global reach and local depth. It reflects our confidence and conviction in Hong Kong's future growth. And 3rd, we delivered strong returns to our shareholders. We announced a full year ordinary dividend per share of $0.75, up 14 percent on 20/24.
Let's turn straight to the progress we're making on strategy execution. In October 2024, I set out a clear agenda to unlock HSB CS full potential. To do so, we now run the bank on 4 core complementary businesses, two home market businesses, UK and Hong Kong, and two international network businesses, Corporate Institutional Banking and International Wealth and Premier Banking. Each business is growing, each is generating above mid teens return on tangible equity and each is building on strong foundation for future growth.
We are focused on three clear priorities and we are moving at pace with each. One, be simple and agile, 2 drive customer centricity and three, deliver focused sustainable growth. Now let's look at each priority in turn and our progress. First, simple and agile. The first step in unlocking HSBCS full potential is reengineering to reduce. Complexity and cost structure and strategy are now aligned. Accountability is sharpened and roles de duplicated.
In 2025, we reduce net managing director positions by circa 15%. We are taking $1.5 billion of annualized simplification saves straight to the bottom line with immaterial revenue impact. We expect to have taken action to deliver these saves by the first half of 2026, six months ahead of plan. We're also making positive progress with the reallocation of circa $1.5 billion from non strategic or low returning businesses. The medium term intent being to reallocate these costs to areas of competitive strength and generate accretive returns.
In 2025, we announced 11 business or market exits. Completed and announced exits account for nought point $7 billion in annualized cost savings with around $1 billion of associated revenue. Nought point $6 billion remains an active execution including those under strategic review. Then following the privatization of Hang Seng Bank, we are increasing reallocation costs to $1.8 billion, reflecting an additional nought point $3 billion of reported basis cost synergies across HSBC and Hang Seng Bank. We will direct this nought point $3 billion to growth opportunities in Hong Kong.
We are also streamlining and upgrading our operating model by simplifying the bank at scale and retiring non strategic applications. And we are re engineering whilst focusing on resilience and risk management. Next priority #2 drive customer centricity. Our four businesses are built on customer trust. Our investments to improve customer proposition and experience are yielding results. Net Promoter scores have improved or remained top ranked in our home markets.
In Hong Kong, we added 1.1 million new to bank customers, taking the total number of customers to more than 7 million. Our UK business lending, Our UK business banking lending grew 13% year on year excluding COVID loan run off in CIB. Corporate surveys have positioned us as a market leader in trade, in payments and in foreign exchange. In IWPB, we attracted net new invested assets of $80 billion.
Next priority #3 investing to deliver focused, sustainable. Growth our Hong Kong home market. As a dynamic economy, a top three global financial centre and the thriving trade gateway, it is the Super connector between mainland China and the world and it is set to become the world's leading cross-border wealth hub by 2029. The privatisation of Hang Seng Bank enables us to scale capabilities and drive growth across both banks for all customers. We have the ambition and we have comprehensive plans to deliver nought point $9 billion of benefits through reported synergies and an unlock of opportunities by 2028. It is an investment for growth.
And if we move beyond Hong Kong and look at. HSP, CS Other core strength. We are an Asia Middle East powerhouse. Asia and the Middle East are increasingly central to global trade and capital flows. Global trade is being rewired. Asia's growth is increasingly powered by intra Asia demand. Asia is buying Asia. The Middle East is scaling as a global capital trade and investment hub. Its integration with Asia is accelerating. The Asia Middle East corridor is becoming a defining axis of global growth.
Wealth creation across Asia and the Middle East is also structurally strong. That is why we're investing to consolidate our powerhouse position and capture these growth opportunities. We are also investing to connect the world, scaling our capabilities, building new capabilities and supporting customers secure commercial advantage from real time services. Our customers are making real time 24/7 payments across 35 markets. They're also using frictionless tokenized deposits and payments in four markets, including the UK with more to follow.
And we are pioneering the future of finance. Last month, the UK Treasury selected HSP CS distributed Ledger technology as its preferred platform for its UK Digital Guild pilot. Next, our people in technology, we see innovation and culture as core to our competitiveness and we are investing in both. We are scaling AI adoption 1st to empower our colleagues, second for end to end processor engineering, and 3rd to enhance customer experience.
Our customer relationships are built on trust. AI strengthens how we act on that trust, personalizing service at scale. The strong culture turns a clear strategy into results and we are investing to nurture a high performance culture. All our senior leaders and the broader Managing director cohort have attended our new group wide leadership training. Finally, let's turn to our new targets for 20/26/27 and 28.
2025 has been a year in which we have performed, transformed and invested for growth. This gives us the confidence to set out new growth targets. We will target revenues growing year on year every year, rising to 5% in 2028, excluding multiple items. We will target return on tangible equity of 17 percent or better in each year from 2026 to 2028 excluding notable items and a dividend payout ratio of 50% for each year excluding material notable items.
To conclude, we are creating a simple, agile growing bank built to generate high returns. We are executing our strategy with discipline and precision. We are delivering growth, we are investing for growth, and we are confident we can navigate uncertainty from a position of strength. That is why we are confident in setting these new targets and in our ability to continue delivering for our shareholders. Let me now hand over to Pam.
Pam
Thank you. Thank you, George. Thank you everyone for joining. We have had another strong quarter which reflects the positive progress we are making towards creating a simple, more agile growing HSBC. We are investing for growth. Throughout this presentation, I will exclude notable items and focus on the fourth quarter numbers compared to the same period last year on a constant currency basis.
Let's turn straight to the highlights. In the fourth quarter, revenues grew 6% to $17.7 billion. This was driven by broad based growth in banking, Nii and fee and other. Of their income, profit before tax was $8.6 billion, up 17%. Our customer deposit balances stand at $1.8 trillion, an increase of $78 billion when we include held for sale balances. Full year return on tangible equity was 17.2%, achieving our mid teens or better target in 2025.
We maintained tight cost discipline managing target basis cost growth to 3% in line with our cost growth target. Turning to capital and distributions, our CET One capital ratio was 14.9%, up 40 basis points in the quarter, reflecting our organic capital generation and expectation not to initiate any further buybacks for up to three quarters following October's announcement of our intention to privatize Hang Seng Bank. As George said, this strong performance allows us to announce ordinary dividends for the year of $0.75 per share, an increase of 14% on the prior year.
Turning to our business segment performance, we grew full year revenue by 5% to $71 billion. Each of our four businesses grew revenues, each grew deposits deepening customer relationships, each returned a mid teens or better return on tangible equity excluding notable items. We are pleased to be making such positive progress firm wide Moving next to our privatisation of Hang Seng Bank. On 9th October, we announced our intention to privatise Hang Seng Bank. We are pleased to have completed on 26th January sooner than our initial expectation of the first half of 2026.
This slide explains the financial rationale. Let's walk through it, starting with a $13.7 billion purchase price. The removal of the $3.8 billion minority capital inefficiency takes you to the $9.9 billion of common equity Tier 1 consumption. The removal of the capital inefficiency is around 1/4 of the purchase price. The $9.9 billion CET one consumption is equivalent to buying back 4% of group shares at the point of announcement.
Next, we show the naughty point $8 billion minority interest in the P&L and the nought point $5 billion of pre tax synergies from the privatisation. Together, the minority interest and the synergies contribute more than 4% to our profit, beating the buy back threshold. On top of this, we see potential further revenue and cost upside of naughty point $4 billion enabled by the privatisation. Then on the right of the slide, we see good growth in Hong Kong in the years ahead. Having two fully owned banks positions us well to capture this growth.
As we said in October, we are acquiring a business with structurally high pre impairment margins and while we are not calling the credit cycle, we believe it is a cycle. Let's now turn to banking Nii. Our Folia Banking Nii was $44.1 billion. In the fourth quarter, Banking Nii of $11.7 billion grew Naughty point $7 billion. Naughty point $4 billion of this growth was in Hong Kong, including the recovery of Hibo during the quarter.
Banking Nii in the fourth quarter included a positive benefit of around $100 million for items that we do not expect to repeat. We expect full year 2026 Banking Nii of at least $45 billion with the impact of expected lower rates more than offset by deposit growth and the tailwind from our structural hedge. Next to wholesale transaction banking. This year has really validated the strength of our franchise in a range of economic, market and tariff situations. We have deepened customer relationships and our global network has. Helped our customers navigate volatility and. Uncertainty in the quarter.
Security services grew fee and other income 6%, reflecting higher market valuations and new mandates. Payments grew 3%, driven by new mandates and payment volumes, in particular international payments. Foreign exchange increased by 1%, reflecting strong client flows and higher levels of volatility. This was a good performance given the strong prior year comparison. Trade was down 5% in the quarter, but it was stable over the full year. I would note the first half was particularly strong given advance ordering as we supported clients to navigate a fast changing landscape. We continue to see growth in volumes and strong client engagement.
Let's now turn to wealth. Including the new disclosures we are setting out today, we are very pleased with the 20% year on year fee and other income growth to $2.1 billion and we are very encouraged that this was driven by all four income areas, which shows the sharpening of our strategy is working. Asset management grew 14% and private banking grew 8%. Investment distribution also performed well, up 14%, reflecting strength in our customer franchise in Hong Kong. Our insurance CSM balance was $14.6 billion, up 21% versus the prior year. We continue to attract net new invested assets with $7 billion in the fourth quarter.
Today, we are giving you new disclosures which you will see through on this slide. These better show the strength of our relationship with our customers, including both their deposits and invested assets. We are focused on capturing the full wealth opportunity and we will now report wealth balances and net new money. I appreciate that the wealth balance figure is similar to the invested assets, but I would highlight two changes to note. You will see these set out on Appendix Slides 3132 and 33.
We have added $608 billion of premier and private bank deposits to the invested assets. That is offset by taking out $580 billion of asset management third party distribution assets. This is a good business, but it does not reflect our wealth customers. Adjusting our disclosure in this way also means our wealth business is more easily comparable to the broader peer group. These new disclosures will replace the existing ones from the first quarter of 2026. We saw net new money in the quarter of $26 billion, of which $19 billion was in Asia.
And wealth is not just a Hong Kong story. It runs across our Asia and Middle East franchise with double digit invested asset growth in Singapore, mainland China, India and the UAE. Next to credit. Our ECL charge this quarter was not point $9 billion. There was no material impact from Hong Kong commercial real estate in the quarter. On slide 29, you will see we have updated the commercial real estate disclosures. Movements in the fourth quarter were in line with our expectations. Our full year 2026 ECL guidance is around 40 basis points. This is at the higher end of our typical range, reflecting the economic outlook and remaining pressures in parts of retail and office commercial real estate in Hong Kong.
Let's now turn to costs. We delivered 3% target paces cost growth in the full year. Hitting our cost goals while making the space to invest in the bank was a key theme of 2025, it will be again in 2026. We have taken actions to realize $1.2 billion of annualized simplification savings with immaterial revenue impact. This is ahead of our original timeline of $1 billion by the year rent 2025. On a realized basis, we have taken naughty point $6 billion of the simplification saves into the full year 2025 P&L.
Together with ongoing discipline, this allows us to guide for 1% cost growth on a target basis for 2026 while reinvesting in the business. Next to customer deposits and loans, we had another strong quarter with deposit growth of $50 billion. We saw good growth in each of our four businesses. Loans increased by $5 billion. The UK was again the standout with another quarter of growth in mortgages and commercial lending. Our UK business is well positioned to support growth in the UK economy.
We are particularly pleased with the momentum in our commercial loan book where we see significant potential particularly in infrastructure innovation, social housing and mid market direct lending. Now turning to capital, our CET one ratio is up strongly to 14.9%, primarily reflecting good organic capital generation. Although after the balance sheet date, I draw your attention to the impact of the Hang Seng Bank privatization, which is 110 basis points in addition to the 10 basis points already incurred in the fourth quarter. We have said this out in Appendix Slide 27.
As a reminder, we said when announcing the offer on 9th October that we expected to suspend buybacks for up to the next 3/4. That is of course dependent on underlying capital generation. With strong profitability and current modest loan growth, we remain highly capital generative. A decision on future share buybacks will be taken quarterly subject to a normal buyback considerations.
Let's next turn to the full year performance. Excluding notable items and at constant currency, revenues grew 5% to $71 billion. Profit before tax was $36.6 billion, up 7%. Year on year to a record high return on tangible. While equity was 17.2% achieving our mid teens or better target, our strong performance allows us to announce ordinary dividends for the year of $0.75 per share or $12.9 billion.
Let's briefly return to the new targets George set out earlier before I close on guidance. We made clear and positive progress in 2025. That is why we are now raising our ambition to target 17% return on tangible equity or better, excluding notable items in each year from 2026 to 2028. We will also target year on year revenue growth. In each year over the period, rising to 5% in 2028 compared to 2027, excluding notable items. And as you would expect, we maintain our discipline of a 50% dividend payout ratio excluding material notable items and related impacts.
Finally, to guidance, this slide gives you our guidance mainly for 2026. We saw revenue momentum continue in January, including in wealth. On the slide, you see banking Nii of at least $45 billion. Our revenue ambitions for our wealth business are contained within our revenue target. We have therefore removed growth fee and other income at a double digit percentage kegger from our guidance, we see an ECL charge of around 40 basis points broadly stable on 2025. We expect to constrain cost growth to 1% on a target basis. This benefits from our organizational simplification and allows us to continue to invest in the business.
There is no change to our CT1 target range of 14 to 14 1/2%. In 2026. We will deliver the $1.5 billion of savings from the reorganization. We are well on track with the $1.5 billion of reallocation costs, which will be redirected towards priority growth areas. We are now adding the expected Naughty Point $3 billion of Hang Seng Bank cost synergies to the original, not $1.5 billion of reallocation costs. Taking this to circa $1.8 billion on Hang Seng Bank specifically, we see Naughty Point $5 billion of revenue and cost synergies to be achieved by year end 2028 as well as an additional.
Nought Point $4 billion of potential further upside enabled by the privatization. To achieve this Nought Point $9 billion, we will incur A restructuring charge of nought point $6 billion from the Hang Seng privatization, which will be a material notable. Item too close, as I said to you. Last year, I'm fully focused on discipline, performance and delivery. Discipline means prioritizing with precision, maintaining strong cost control and ensuring investment rigor for growth.
Performance means gearing our financial strategy towards achieving our new returns. Target delivery means ensuring we remain agile and resilient, enhance operating leverage and are always well positioned to support our customers. This is exactly how we will continue to run the bank. With that, we are happy to take your questions, Alistair.
Alistair
Thank you, Pam. Thank you, George. We'll take any questions from the room here in Hong Kong. First, if I could ask you to introduce yourself and your company and this been the hard part. Constrain yourself to two questions each, please. That goes for people on Zoom as well as people in the room. Anyone who'd like to ask your first question here? Yeah. We'll take a question from Nick.
Nick Lord
Yeah, it's Nick Lord from Morgan Stanley. And thank you very much for taking my question. I'll put it in one question in two parts, if that's OK. I'm just interested in your revenue target by 2028 of achieving 5% revenue growth. And I just wonder if you could talk about some of the components of how you would get there. Presumably wealth is is part of that. And so maybe you could talk about the wealth trajectory and and how sustainable that is. Presumably at some stage we're going to see sort of a kick in of sort of the development of markets in Asia and and that markets business can grow more. So I wonder if you could talk a little bit about how you want to grow that markets business in Asia. Thank you.
George El Hedary
Thank you, Nick for the question. Going to share some high level comments as we are looking at the growth opportunities and Pam can take you through the various components. The first thing is we have delivered growth in 2025 and we have delivered growth as we mentioned across all our businesses and all our key metrics including deposits, loans, including fee income and transaction, banking and wealth. And and this is reflected in our revenues growing at 5 percent 2025.
The second item to call out is if you look at our footprint, we're actually basically aligned to the strong structural growth opportunities. Hong Kong, we've called it out and we're basically consolidating our leadership position to capture these growth opportunities with the privatisation of Hang Seng among other Asia, Asian Middle East structural growth opportunities and wealth, but also Asian Middle East hitting record volumes and shipments for trade. Asians buying Asia and we are in our footprint allows us to capture these growth opportunities.
The UK, we've seen the strongest loan growth in 2025. And we have indicators to to believe that there there is a. The possibility for the strength to carry on this is the strongest strong growth we've seen the UK for many years, but also the strongest strong growth that we've seen across all our businesses that we have seen in the. And then the last thing I will call out is that we are investing for all these. Growth opportunities, we're putting now investment from within our cost base, we're putting investment from the additional costs we're, you know taking in 2026.
And we will be putting even further investments from the reallocation of the 1.8 billion as we feed up these costs back into those core areas where we can grow. And this is what's giving us this confidence to give you the growth targets of revenue growing year on year every year rising to 5% in 2028. Thank you, George.
Pam
So firstly, in 2026, we expect broad based growth in revenue across all our businesses, but just unbundling a little in banking and I as we have said, we expect a low single digit growth fundamentally driven through deposits. Yes, there are pockets of growth and loans, but so far we've just seen in the UK market overall, we expect that growth in wealth and transaction banking and our fee generating businesses will continue to be very positive as we go beyond 26.
We do expect balance sheet growth should kick in in Asia and other markets, not just in the UK. Of course we are seeing growth in the US already, but we are not a big player in the US market domestic growth and we are continuing to invest in our few businesses and our investment plans are multi year plans. So it's not just for growth for one year. It's a very strong building block for growth through the period we have called out and beyond particularly in markets like Hong Kong in the UK and other key markets for us in Asia and the Middle East. Thank you, Nick.
Alistair
Thank you. Any further questions in Hong Kong? We'll go straight to the Zoom. I think the first question on the zoom then please is, is with Joe Dickerson at Jeffrey's. Actually I've announced you yourself there, Joe. So please unmute and go ahead.
Joe Dickerson
Thank you, Alistair. Good set of results guys. Just a quick question on the costs. How, if, if you look at the 2026 number that you've given the, the kind of 1% growth, I know you've got your recycling. How do you think about when you peel that back? You know, what's the, the, the metabolic rate of, of growth in costs, particularly coming from investments? Because you clearly have some global peers who've accelerated their investments around AI. So I was just curious how how you think about that. And then secondly, nitpicky question, but what what rate of high board have you assumed in the in the banking Nii guide of greater than 45 billion? Thanks.
George El Hedary
OK, thank you very much Joe for your questions. Let me let me share some high level considerations how we're looking at costs and I'll ask Pam to comment then on costs and on high board rates and I shared a bit earlier. But I want to emphasize first within our cost base, there's a proportion set aside for investments, for change the bank investments, digital capabilities, additional people, hires, relationship managers, whether advisory etcetera. Of course generative AI efficiency there is that's within our cost base.
Second, the fact that we're adding cost adjusted for the savings, half of that additional cost will go towards payroll inflation, but the other half will go towards additional investments. And then third, the recycling of those 1.8 billion, which is a commensurate to about 5-6 percent of our cost base will go back into those areas of investment for growth. So we believe we have ample capacity to invest and deliver the growth that we are setting ourselves or setting targets to deliver against.
Then the next thing I would say about costs is that it's important Joe to we are committed to cost discipline. We are confident in our ability to deliver to cost discipline. And as you've seen for our 2025 results, we have met our cost targets. So I think that's an important guide also as you look at our cost guidance for 2026. Thank you, George.
Pam
So firstly, I would note that we are ahead on our simplification saves because our plan and the actions we have taken have come through sooner than what we had originally outlined. This gives us incremental saves of $700 million in full year 26. So that has been a consideration in the overall 1% cost growth envelope. And as George said, you know as we have our divestments happening, we are continuously redeploying those, reallocating those costs to our priority growth areas.
What's really important for us is that our investment rigor is focused on our strategic. Priorities, that's what we've done in 2025, that's what we will do going forward and these are committed plans which are multi year plans. They don't go back and forth every year. So that's all part of the the overall cost envelope guidance we have given for this year. And again we're going giving guidance for this year only, but we may expect to maintain a cost rigor on a continuous basis.
In terms of rate assumptions, we have used the end January forward rate curve for our banking and I, I guidance for all major currencies. So in terms of highball, just to note a couple of points, our highball volatility that we saw in Q2 and Q3 when Hub was at 1% has an impact of about $100 million on banking. And I, I the moment Hub was sort of stabilizes as it did in Q4 and indeed this year, although it has fluctuated a little bit around the 2.5 mark that is captured in our guidance. And we look at a few plausible downside scenarios as well before we give a full guidance. Thank you, Joe.
Alistair
Thank you. Our next question on the Zoom is from Ben Toms at RBC.
Ben Toms
Morning both. Thank you for taking my questions. Morning, Asda. Firstly on your ROT guidance of greater than 17%, I'm just looking for some commentary about how sustainable you feel that guidance is beyond the announced planning horizon. So how much you feel this guidance isn't all weather guidance? Post all the investments that you've been making? Into the business and then secondly on the Hang Seng synergy. On Slide 13, do you mind just talking a little bit around why you've adopted 2 buckets that you've labeled synergies and upside? Is the upside bucket basically where there's a lower degree of certainty over the synergies? Some, some colour on what type of synergies fall into each bucket would be useful. And presumably, there's no incremental restructuring costs associated with the upside bucket on top of the naughty point 6 billion. Thank you.
George El Hedary
Thank you very much, Ben. On on the Hang Seng guidance, what I will share is we do have the management ambition and we do have comprehensive sets of plans to achieve the full nought point $9 billion upside with the restructuring cost that we've called out. I'll let Pam give you the details on the OT guidance. We are not guiding beyond our horizon, but you should always assume that we are ambitious. Thank you, George.
Pam
And just to say, on our roti guidance, we continues to see a positive momentum in our businesses. And as we said earlier, we are investing for growth, but of course, the targets are only for three years. So in terms of the Hang Seng synergies, you're quite right. The 500 million is what I would call the reported synergies following accounting rules. The 400 million synergies are depending to some extent on markets and customer behaviour. So there is some degree of uncertainty and they don't strictly fall between what is considered to be accounting reported synergies. So that's the reason why they're two separate both these synergies.
The plan to get that 900 million benefit is by the end of 28 and the restructuring cost of 600 million covers the benefits across both buckets. And now beyond that, we actually believe, as it says on the slide, that at some stage the credit cycle will be normalised. So there will be some benefit coming from there. There will be more growth in lending as well as overall Hong Kong growth, which we will continue to be very well positioned for because of the redeployment of the cost allocations that we have. There will be a fair chunk that obviously goes into Hong Kong, which is a core market on our strategy. Perfect. Thank you, Ben.
Alistair
Yeah, we have a question in the room next, Melissa. So you'll have to introduce yourself fully.
Melissa
Hi, I'm Melissa from Goldman Sachs. Just two questions. In terms of the Synod strategy that you have the five rising to 5% revenue growth, just wanted to see if you can give a bit of a Keger growth instead so we can understand, you know the pathway there in terms of that, you know, I I suppose will it be coming largely from the non banking Nii portion or will it be from the banking Nii? So that's my first question. On the second question, perhaps on the restructuring cost at HSB of 0.6, can you just give a little flavour about what is it that we are doing and this in in terms of the restructuring that we need such a cost where we focusing on in terms of delivery And then how you know we will see the revenue synergies and and in terms of the revenue synergies, can it be as quick as next year or or will it be more heavy into 2028 as per your three-year guidance rising to 5%? Thank you very much Melissa.
George El Hedary
I think Pam can address both questions.
Pam
Thank you, George. So firstly, we've said that revenue growth, it's positive each year, but it's also progressive and reaching out to 5% by 27 to 28. In terms of the underlying building blocks, we've said to you that in 2026 where we have given the guidance on banking Nii, it's a low single digit. So therefore, similar to to the prior year, we will see more positive growth momentum on the fee generating businesses and beyond 2026 banking. And I, I of course we look and see where the guidance is, where it is, where the rates are and what's the timing of the rate cuts as we go into 26.
But we are continuing to to invest in our fee generating businesses. So we see that momentum in those businesses, including wealth, which really underpins this revenue growth and wholesale transaction banking to continue. And I'm hoping that at some stage we'll see a little bit more of growth in the balance sheet in terms of lending beyond UK that we have already seen. Now in terms of the restructuring costs, there are a couple of elements that drive it. One is the some organizational alignment, so there will be some. Roles which will evolve and teams that will be realigned.
But it's large chunk of this is really in terms of technology. So the investment in technology so that we can better harmonize our technology and better to get results from the technology. It's investment we have across both the green and the red brand. And this is really quite critical for us in order to achieve the overall ambition of the 900 million because it's the 900 million ambition. Just to reiterate, it's not just a cost story, it's a revenue and a cost story. And this is an investment for growth and that's how we look at it.
And we plan to spend the restructuring costs of 600 across the three years and of course, this will be spread through these three years. We are not saying anymore in terms of revenue synergies. We strongly believe that by the privatization of Hang Seng Bank, our ability to be able to provide a broader product proposition into the green band is highly enhanced. So we'll have better wealth products for our retail customers. We have have capital markets and broader wholesale transaction banking products for the wholesale customers.
But more importantly, we will be able to have access for the same international network that we have for the red brand, also within the green brand. And last but not least, we will have more balance sheet flexibility in terms of how we leverage our treasury capabilities, but also in terms of upstreaming and downstream capital. And this will all be done over the next three years. Thank you very much, Madison.
Alistair
Thank you. We'll go back to the Zoom. The next question will be from Aman Raka at Barclays.
Aman Raka
Hi, Pam. Hi, George. Had two questions please. So one is around capital, there looks like a decent chance that you'll be within your target CT 1 range in Q1 based on historical and perhaps projected capital generation kind of estimates. Obviously, it raises the prospect as to whether you might be able to reintroduce buyback earlier than than planned. I don't know if you're able to kind of comment on whether that's a realistic or plausible scenario. But I guess more specifically, just just interested in the capital capital allocation thought process from here.
Clearly your stocks trading at a level now where the return on investment around buy back, you know, might be beaten by alternative uses of capital. Obviously, you did it with Hang Seng, but you know, should we be thinking about inorganic growth as well as the compelling organic growth within your footprint? And then I just wanted to ask around banking Nii please. Clearly that that kind of Q4 jumping off point is flattered by 100 million. I don't know if there's anything else that you'd direct us to, to kind of strip out of that number in terms of deposit catch up or you know, the impact I bought and I was particularly interested in what your deposit growth assumption is that sits behind the the guidance you give in 26 please, because I think that could be a sensitivity around the ultimate out turn of of banking and I I in 26. Thank you very much.
George El Hedary
Thank you, Aman. Time is best place to answer both, but I want to share a few thoughts about our philosophy on capital. First, we remain capital generative as you've seen from our targets, but also as we've experienced over the first month and 1/2 in the year in 2026. So we're very, very pleased to see that our capital generation is strong. But our our first priority is now restoring the CET one ratio following the privatization of Hang Seng, which we estimated to take us 3/4. But of course we do that assessment quarter by quarter.
But I do want to point out to the increased dividend we are paying this year 75 cents, $0.45 on the fourth quarter, which is on a full year basis 14% higher than last year. So we are distributing through dividends what I wanted to share about the discipline, how we use capital. We've shared it in February 2025, a month. We've set ourselves four key criteria. They're a high bar and we strictly adhere to them in the way we look at inorganic opportunities. In so far that these 4 criteria are met, like in the case of Hang Seng privatization, then we will consider inorganic. But if one of these criterias is defeated, then our preference will be to utilize or return any excess capital back. Our shareholders in the form of share buyback, Ben.
Pam
Thank you, George and thank you, Aman for your questions. So firstly, as George said, we continue to remain highly capital generative. We've had a good start to the year as I called out earlier in my remarks. But as you know, we look at our share buyback decisions on a quarterly basis and that will be a quarterly process. The starting point is clearly our target operating range, which we are working hard so that we can replenish the capital that has been deployed in the Hang Seng Bank privatisation. That's the first priority as George said. And that CET 1 operating range remains 14 to 14 1/2%. That's the one which underpins all the targets and guidance we have given today.
Just to clarify in terms of our priorities from there on, of course the priorities are 50% is the dividend payout ratio, which we have again reaffirmed. We would like to see balance sheet growth and we want to invest for growth. That's if we can have growth at the right return levels. Our distribution priorities hence have not changed and share buyback remains for us a useful tool to deploy surplus capital irrespective of where the share price is. So I think that's an important consideration for us going forward.
Next question on banking, Nii, you're right there was 100 million non repeat items. So if you take that out for modelling purposes, you come to 11.6 billion. There are no other one offs. There was a higher Hibo quarter on quarter and Hibo also stabilized and that's why as you remember third quarter when we gave a more cautious outlook because we don't know where Hyber would be. But having seen Hyber stabilise, it gave us the the upbeat on our banking and II results.
We also saw low betas on saving accounts in Hong Kong. And very importantly, we saw strong deposit growth and we do expect the strong deposit growth to continue to be a key driver in 2026 along with the tailwinds of the structural hedge similar to last year and redeployment at higher rates. The only thing to bear in mind is that for this year, clearly in Q1, given that there will be two days less, there will be a headwind of 300 million in Q1. We have assumed obviously the the rate changes both that you've seen to date as well as projected for the year, but a lot depends on as you can imagine, the timing of those rate changes, particularly in the US dollar and sterling. Thank you.
Alistair
Yeah, thank you. So we'll take the next question back on the Zoom, Amit Gol at Mediabanka.
Amit Gol
OK, thank you and thanks for taking my question. So 2 for me. The first one, just coming back on the ROTI, the upgraded ROTI targets the 17% plus. I just want to check in terms of how you're thinking about that on a kind of year on year on year basis for 2728. I mean, are you, are you thinking that ROTI kind of continues to improve or are you thinking more, you know, 17 cents kind of a very acceptable and a good level. And so, you know, any additional upside you would look to reinvest? And within that I kind of note that, you know, on the L tip, you've kind of brought up the lower end of the, the, the, the kind of the boundary for performance to I think to 16 1/2% from 14. But the 18% of the top end hasn't changed. So I appreciate that stunned by the compensation committee, but I'm just kind of curious how you're thinking about what appropriate or sustainable level of return is.
And then secondly, again, just coming back, maybe more clarification on the Hang Seng Bank kind of benefit and and restructuring charge. So I mean, I guess I'm just curious really for a bit more detail on the .4 billion of additional benefit that I guess from an accounting standpoint can't be treated as a synergy, what exactly that is. And and within the restructuring charge, I think previously said that there's actually going to be more of a, you know, less stuff natural, there will be more natural attrition and redeployment. So there'll be very limited kind of day one kind of cost. So I'm just curious what you're spending that money on. Thank you.
George El Hedary
Perfect. Thank you, Amit, very much for you. 2 questions. PAN can address them, but just to talk about ELTA briefly, this is indeed the remuneration committee. Duration, it reflects the performance that we will achieve in 26/27/28, which aligns to the guidance we're giving you. So there isn't more than we can say at this stage. Apart from that, it is more ambitious and reflects our ambition to the business. Thank you, Jordan.
Pam
Thank you for your question. So firstly, yes, we have ambitious targets and our target is 17% plus each year. We are not giving a trajectory whether it's the same or progressive, but of course, we continue to grow our business and invest in it diligently. But the target is just 17% plus each year. In terms of our the Hang Seng benefits, firstly, to call out, these are both benefits we are getting from a cost perspective, but also revenue perspective. So classically, what you would see in terms of cost synergies and all the restructuring is actually 7 scores. That is not the case here because there is so much focus on the revenue as well.
A lot of the restructuring will be in terms of investment from a technology perspective, the cost synergies themselves. Of course, there'll be some realignment and evolution of roles and individual areas. It's not something which is going to lead to severance or staff reductions. There could be some role changes. Clearly there will be some scale in product manufacturing and there'll be some technology harmonization. Now when you think in terms of the two bits with the 500, the 400 and why it's so clearly from a cost synergies perspective, it's easier to call out revenue synergies. There are greater haircuts, but we do have very detailed comprehensive plans on how we are going to drive these revenue synergies and those plans underpin the 400, even though they were haircut in the 500.
And just in total, to reiterate, because there are lots of numbers going around, I, I appreciate that think of it as a 900 million benefit in those two buckets, the different degrees of accounting rules and different probability of expectations and then an overall restructuring cost of 600 to achieve that total. And Amit, we, we are net investor in people in Hong Kong. We are also invested in technology in Hong Kong to capture all these growth opportunities we have been talking about. Therefore, we do not expect, anticipate or plan any programme of redundancies.
We do though expect that some roles may need to evolve and we are basically committing to training reskilling to make sure that our own colleagues have these growth opportunities, career opportunities to be able to capture these roles in which we will be investing over the duration of our programme of three years. Thank you, Amit. Number that we have already included in that 600 million restructuring costs for training and rescaling of our colleagues as their roles change and evolve. Thank you, Amit.
Alistair
Thank you. We'll stay on the same with Kian Abu Hussain from JP Morgan.
Kian Abu Hussain
Kian, thanks for taking my questions. First of all, George, congratulations. I have to say you really driving the true bank to a better process and discipline. We haven't seen an HSBC before, if I may say. So to the questions tech stack, can you go a little bit more into detail? You gave a number in 2022 that you're spending about 20% on IT as a percentage of expenses. Wondering if we should think about similar ballpark in within that. Can you go a little bit under the hood and discuss where are you on I cloud, on cloud transformation? Are you done? Where are we on platforms? Are you done or what platforms still have to be produced new or integrated data management? So I really want to understand a little bit what you're doing on the tech side.
And then CRE is this is still an area where I'm a little bit uncomfortable. Stage 3 CRE China 18% coverage, 16% on Hong Kong 14 story on Hong Kong Stage 3. Can you talk a little bit where you want to drive that to? And, and clearly I heard Pam's remarks about provisions and theory was mentioned. Perfect.
George El Hedary
Thank you, Kim, for your two, two questions and for your feedback. I'm going to take your tech question and Pam will cover the Hong Kong theory. And I think it's a very important question. Thank you for asking it. We're indeed driving both performance and this and transformation with discipline, with precision and we're doing it at pace. And we're we're very glad to see that the results of both performing, growing and transforming is delivering at pace as you've seen in our 2024 numbers.
So in terms of tech, you could broadly assume that 20% is the cost that we're spending on technology. But the way we're talking technology now is #1 we're thinking about all those legacy or non strategic applications, which are consumers of from the bank costs, consumers of maintenance costs, patching costs, license fees that we're going to very proactively demise at scale. And we're very pleased to be able to say that we've demised about more than 1100 applications this year, Well in 2025, this is more than 1/3 of the about 3000 applications that we have deemed non strategic and looking to demise.
Just to give you a perspective, we run about 10,000 application, 9000 actually of which 3000 are flagged for demise over the horizon between now and 2028. And we're moving at pace for that. Now that demise will allow us to free up investment capacity to put it in new technology and new capabilities and tech, tech space, cloud transformation. I think we are quite mature on cloud. I think we've moved from a cloud first strategy where we moved many of our applications to cloud to now a more mature and therefore more sophisticated approach to cloud by looking at optimization of hosting of applications.
And therefore we would look at any new applications or our existing stack where it is better SAT. If it is on cloud where the majority is, then it'll be on cloud and then we will look at portability capabilities and resilience capabilities. And if it is on premise then or in the private cloud, then we will look at that. So I think we have matured our cloud approach and we're already in a place where we want to be. But of course we'll continuously evolve it.
If you ask me where is the biggest investment going into the new technology today, it is definitely going into generative. AII wanna just take a minute to explain how we're thinking about generative AI because that's quite important. We're looking at generative AI in three work streams. They're on on the slide eight of the of the pack. The first work stream is we're making generative AI available to all our colleagues in time, 85% mostly now, you know, enabled to make sure that we're helping our colleagues upgrade themselves and become future ready.
The first thinking is how can we bring our whole colleague population with us in becoming future ready generative AI enabled. They will have generative AI tools that they can use. They will have coding assistance or VIBE coding assistance for those among our engineers. 31,000 already enabled and we're seeing immediate productivity gains. We're seeing 60% speeding up in our unit testing. We're seeing five times faster patching of code, patching of vulnerabilities in code. Thanks to all these capabilities, this is our first mission, all our colleagues to benefit, to be trained, to be upskilled, to become future ready, better version of themselves, more productive, better outcome for our customers.
The second work stream in generative AI is fundamental reengineering of our processes end to end. Fifty of those processes are already under review. Some of them have already delivered and finished, such as onboarding in KYC, but all sorts of process, including fraud detection and prevention, credit applications, capital allocations and what have you, data, visas and what have you to allow generative AI to help us redesign the process in a much simpler way. And also allow Gen. AI to be integrated in the process to process data in a much more efficient way.
The result of which is a more productive bank, more efficient bank and a safer bank with stronger controls. And more importantly, a very simple bank that will be able to ultimately deliver to our customers closer to near talk, closer to near real time or real time at the highest possible standard that that's available for us. And that is an ongoing journey. The third work stream we're taking, generative AI is how we enhance customer experience at the customer touch points.
So this is our relationship managers, wealth advisors, contact center operators as they engage with customers, generative AI tools already rolled out. As you can see on the slide, we'll allow them to personalize at scale to tailor make to customize at scale at the highest possible standards for our customers close to real time in a way that can allow us to deliver our capabilities to customers in the much more seamless, faster, better way. Customer experience will be materially enhanced.
Now, today we will have operators using this generative AI to at the service of our customers, but you can envisage that in a few years time we could possibly put these generative AI tools straight for utilisation by our customers. Those are the three work streams. What I want to say though is that we're doing this with safety and security at the forefront. We're doing this in a way that we can review, monitor and audit everything we're doing in the space as a as a critical standard.
And we're doing this in a way to keep controls, resilience and human accountability always there because we had a regulated industry and our customers trust is the most important asset and we will do everything to make sure customers trust is always protected and nurtured. Thank you for that question. I'll hand over to Pam on Hong Kong.
Pam
Thank you, Ken. So just looking overall in our guidance, our around 40 basis points guidance for 2026 considers all our portfolios and of course Hong Kong commercial real estate as well as the very small residual amount of China commercial real estate. And we look at a range of plausible downside scenarios before we give you this guidance. So just unbundling a bit, the China commercial real estate portfolio has really come down. It's now less than 1 1/2 billion dollars and our ECL this year for this was below 200 million. So in that context, the names that have left that portfolio that's left, we feel much better about it compared to where the other portfolio was when he first started with it.
Now, when you think in terms of Hong Kong commercial real estate, firstly, I'm going to give you a bit of an update on the three segments within this Hong Kong commercial real estate portfolio and then how we look at the names, particularly the credit impaired names. Now the first one, we've been calling it for a year and now I'm very pleased to say that the residential component of Hong Kong commercial real estate is near normalized. And I say that because whether I look at in terms of price increases, you know HPI has been up 5% year on year in 2025. But more importantly, we've seen a 10% growth and also sales volume rentals had already stabilised both in terms of the rental demand as well as the rental pricing.
Now when we look at retail and the office space, of course their pockets of distress in it, but just as a broader context, we saw retail sales also in Hong Kong in May turn into positive and they are now up year on year at 6.6%. But of course, this alone is not going to solve the problems of the retail sector because people's retail shopping patterns have changed. They don't necessarily need to go to shops on malls, etcetera. Having said that, as there is more consumption in Hong Kong, we are seeing this shift from shopping. The place is being chained into more food and beverage and so on. But there will be pockets of stress in it and that will be coming from mainly over over the supply at this point of time.
Now office is the sector we are watching very carefully because recently we have seen both in terms of rental demand and in transactions for the best properties with the best spec in central, in the best areas, there are some green shoots. But the downside is at this point of time, vacancy rates are still around 17%. So that's what we will be managing through and then following up very, very carefully. Having said that, in Hong Kong, we are not a distressed seller. It's a market we are deeply embedded in. We really understand well, but we are very resilient in terms of how we do our valuations.
So we go and look at valuations, including distress valuations and we look at widths, our collateral position and we stay well collateralized. And we've been following through this very closely over the last couple of years. The one metric which I personally followed though my job has changed now is what happens to credit impaired names and the exposure that you need to focus on is credit impaired names which have an LTV over 70%. Now this number has grown and is now stands at $1.9 billion. But the ECL? Against it have also grown and they've grown to around 900 million.
And if you go back quarter on quarter that differential between the ECL number and the exposure sits around a billion dollar number. So that's where you think your risk is and of course you have to see if some of the you know substandard names don't fall down and so on. So overall, I would say given what we are seeing and particularly to notice that in this quarter we had a stage 3 against one name, but the macro environment in Hong Kong was positive and as a consequence through our verse 9 calculation, those two almost offset each other. So in that broader picture, we feel very comfortable with the 40 basis point guidance. Ken, thank you for your question.
Alistair
We will take Rob Noble at Deutsche Newmis next
Rob Noble
morning. Thanks for taking my questions. Just on net, sorry, non interest income in 2026, what are the negatives in non interest income for next year? So if you, if you were to grow at the same level which was I think the low teens in 2025, you would blow through 5% revenue growth in in 26 that low in 2028. So why aren't you, why aren't we much more positive on revenues than you're kind of sat here now? And then secondly, just on Hang Seng, what's the difference in the local capital requirements in in Hong Kong and the UK? Does the transaction change anything in terms of minimum group regulatory requirements and how how you manage capital through the group? Thanks.
George El Hedary
OK, Rob, thank you very much. Let me address your first question and Pam may add to it and address definitely the Hang Seng capital question. So the 90% or more of our non interest income and therefore our fee or other income is driven by transaction banking and wealth. So looking at the dynamic in these two will give you a good perspective of how non Nii is evolving transaction banking with reported full year growth of 4% year on year, we're seeing continued momentum in the space.
We are a leader in practically all the aspects of transaction banking that we prosecute with our clients. We've been voted by 30,000 of businesses as the leader in payments both in products, services and technology. We've been nine year consecutively a leader in trade. We've been voted by corporate choosing foreign exchange as the leader in servicing them with foreign exchange. We continue investing in the space. We continue expecting resilience in the space, in particular in trade. And I can talk more to to trade if if desired.
As you look at wealth, wealth remain unequivocally one of the strongest growth opportunities, in particular one given our footprint where we are focusing on Asia and the Middle East. And the underlying growth in Asia and the Middle East of wealth is very strong and our ability to capture more market share is very strong. We're already a leader in wealth in Asia if you look at wealth balances and that's an area where we can benefit from this underlying structural growth opportunity And 2nd wealth, because we are also accelerating our investments in the space you've seen we've built.
You know, we've launched 26 or 27 wealth centres in 2025, taking the total 64. We're hiring relationship managers, wealth advisors, we're empowering our self with generative AI wealth capabilities, we're building technology, we're creating a comprehensive set of products and we continue investing in the space. So we do believe they remain their wealth remains a very strong growth opportunity, albeit we we have dropped the guidance on that and the idea is to give you an overall revenue guidance which is better encompassing the overall opportunities and probably more relevant for your forecasting. Thank you George.
Pam
So firstly, the only comment I'll make on wealth is as George said, we are very comfortable in our broad based product proposition. But the only thing we need to remember is that this year with how the markets have performed their force on some of the wealth that is generated through transactional kind of activity. We'll just have to see how that you know progresses in next year. We're not going to make a call out on how volatile or otherwise markets are going to be in 2026. So if there's anything, that's what would have been good consideration because we have to look at plausible downsides clearly in giving our guidance as opposed to just a base case or an optimistic case. So that's all I would say on that.
Now from a Hanks and capital perspective, we have already got the 3.8 billion. Benefit which comes from the disallowed minority capital which we don't need to have an impact on ACET one anywhere. So that's a positive straight on. But generally in a, in a broader picture, you know, across all our subsidiaries which are 100% owned, we do have more flexibility in terms of how we move our capital, whether it's upstreaming or downstreaming, obviously subject to what we consider the market outlook is where our portfolio is and subject to sort of regulatory discussion. So All in all, it does give us a better ability to move capital around the group and be more efficient in the deployment of capital. Perfect, Thank you very much, Rob.
Alistair
Thank you. The next question we will take again from the Zoom is Chen Lee at China Securities.
Chen Lee
Good afternoon, Georgia and Pam. I have a question about preservation of handsome. Could you provide further? Other information about the growth opportunities, I want to know that. In which aspects of the wealth management business are a. Have more stronger synergies with Hansen Bank and what are other. Outlooks for the OR wealth balances and the wealth management. And margins, thank you.
George El Hedary
OK, 10, thank you very much. I'll hand over to Pam. But remember what we said at the announcement on the 9th of October of our intent to privatise Hang Seng is these are commitments we are holding. Hang Seng Bank will retain it's own authorised institution and governance. It will retain it's own brand in Hong Kong of course as a major community bank and the largest local bank. It will retain an independent customer proposition that will compete in the market for all customers. It will retain each its branch network and that proposition will remain intact with a distinctive cultural strength and customer proposition, customer experience strength that Hang Seng has been known for, for practically essentially in Hong Kong.
What we are driving through this privatisations is better efficiencies in cross selling or better efficiencies in aligning back office or manufacturing capabilities that are not related to the customer proposition. Thank you George.
Pam
So firstly, as George has said that the positioning of Hang Seng Bank as an iconic community bank in Hong Kong stays. What we will endeavour to do is that post the privatisation, we don't have that arm's length relationship restriction that prevents us to do more in terms of product proposition, offerings and cross referral to our customers. And also in terms of the investment dollars that we spend, we can't spend them if it's on the same product, on the same customer journeys seamlessly across both the red brand and the green brand.
So that gives us a very good position that as these two stand alone brands, our ability to lean into the growth in Hong Kong and the macro opportunities including cross-border will be available to the broadest customer base while maintaining that community element of service for those customers. So that's how we are looking at it and we will look at obviously wealth products as well as price seeing margins so that we can really make them more easily available for our customers. Jen, we are the market. We are the market leader in Hong Kong undisputed. We are consolidating and cementing this leadership.
The Hang Seng buying privatization will allow us to consolidate that leadership even further and all sorts of broad range of products and services. And we have a leadership position in capturing these growth opportunities that that was talking about in Hong Kong as a super connector between the mainland and the world, as a as a, you know, the poised to become the leading cross-border wealth hub on the planet before the end of the decade. And it's it's really a privilege to be in the position we are in to be able to capture this with the, you know, full HSBC and Hang Seng propositions. Thank you, Chen.
Alistair
Yeah, thanks very much. So I will take the next question from Ed Firth at KBW. Go ahead.
Ed Firth
Yeah, thanks very much and morning everybody. I just had two questions. One just talking about the the high bore benefit in Q4 for your net interest income. I think one of your peers talked about is about it as a temporary benefit and I guess I'm not close enough to the franchises and how you price et cetera domestically. But I guess do you know is there anything peculiar about you or some of the peers about the way you repriced Casa accounts or something in Q4, which would mean that yours should be sustained, but somebody else's might be, might be temporary. So I guess that's the first question.
And the second question is I guess it's slightly an extension of Rob's question. I'm not quite sure what what is so specific about 2028 that means you can get 5% revenue growth there, but but I assume you you don't feel you can before then. And I know that at the moment, you know, 26 we've got some headwinds from from interest rates, but you've also got a very strong tailwinds around things like wealth management. Pam highlighted that. And 27 I guess should be a reasonably normal year. So I'm just trying to think is there something that I need to think about that you can see that it's happening from 28 and beyond that will make your revenue growth better that we're not seeing today? Thanks very much.
George El Hedary
OK. Thank you very much, Ed, for your two questions. Pam, do you want to address?
Pam
Yeah. So let me just unbundle the situation with regard to Hibo. So in the fourth quarter, Hibo stabilized and we had called out in the prior quarters that in 20 and I'll come to Q1. In a second that in Q2 and Q3 hibo was very volatile and we were looking at the comparison for a Hibo close to a 1% where it has an impact of about 100 million in terms of banking and I on a monthly basis and then stabilizing to something which is in the 2% mark. We look at hibo on a one month hibo basis. We feel very comfortable as long as hibo is around 2.252 point 5 and so on.
I fully recognize that in and I don't know what you know other players would say like what you know tenor of Hyber rate is most relevant for them. I'm just telling you from our perspective now in Q1 hyber has fallen, but we have to see the context. There's been a range of IPOs that normally happens, you know when there's that demand for for hyber fluctuation, but it has fluctuated within a narrow range. So the impact isn't there. Also last year in in Q4 there was a benefit of a lower betas. So when Hyber went up, the same impact wasn't there on the savings rates. Of course, we'll have to look at betas, how they evolve.
And then we have a very strong deposit franchise. And I think that's our differentiator in terms of the Casa level that we have in terms of our accounts. And therefore we have a good positioning where that deposit base helps us on the banking and I more than most of our of our peers obviously in terms of both banking and I, I this year and also our ambition, it's the rate headwinds. And as I said earlier, it's the timing of the rate headwinds. If they're delayed, of course it becomes less of a headwind. If they are earlier, then there is more sensitivity to it.
So I would say in from a wealth business as I also alluded to earlier, yes the growth is very strong with its asset management, wealth products, insurance, it's broad based growth. But last year there was you know a great advantage or a tailwind coming from markets which gave us a lot of uplift on the transactional based fee income. We can't assume that for this year. Of course if markets stay well and that happens then that's a positive tailwind. So that's how I would I would look at it and I would look at 28 not specifically as the year 28, but as what would we believe our long term structural opportunity to grow.
It's our guidance for 28, but we've delivered 5% revenue growth and. 25, we've delivered 4% in in 24. So it's just as you know the the footprint we're in and the capabilities for us to capture the growth is there and they like to be cautious. To be fair, we have to consider downside scenarios as well. We don't always take the best case. That's all I would add. Perfect. Thank you, Ed.
Alistair
Many thanks. We've probably time for a couple more questions. We'll take Alistair Wall to Autonomous next.
Alistair Wall
Morning, George. Morning, Pam. Thanks for making time for us. 2 questions. Back to Hang Seng Bank, I'm afraid. And you touched on potential upside from asset quality improving. I just wondered if that's something you're thinking about in terms of maybe more active steps or is this just about being patient with the property cycle? And then just on the wealth side for a second question, looks like there's a bit of a slowdown in the new account opening in the fourth quarter. If you've got 1.1 million for the year and you were running at about 300,000 a quarter, is that just seasonal or, or anything changing there that we should be aware of? Thank you.
Pam
Thank you, Alistair. So just in terms of the asset quality, the comment I made was that if you look at Hank Seng's pre impairment margins, they've been very strong. If you look at what Hank Seng's ECL charges have been prior to 22 versus in 2425 and even the run rate for the first half of the year and then what's consolidated for the for for the full year. That's what I meant by the overall improvement. And that would be both for Hang Seng Bank as as would be for HSBC Red brand. And that's the only way to to look at it in terms of you know our own policies or processes and how we manage exposures both for the red brand and green brand, they are highly aligned how the rigor we follow through them. I don't expect any of that to give us either a tailwind or a headwind.
So in terms of the new to bank customers, you know yes, it was 1.1 million just to clarify for the red brand and the fourth quarter also had a good number. We believe that this new to bank customers is a huge growth opportunity for us. However, we are trying to be now a little bit more selective on the acquisition because we have now had a three-year trend on how the acquisition has happened in between the lower end of the customer base and the more premier. We have added a fee for the new to bank customers who have a balance less than 10,000 Hong Kong dollars.
And because of that, we expect that there would be slightly slower acquisition in 2026, but the focus on our affluent customers is going to continue. The focus of the improvement in our overall income when it's through deposits, wealth products, insurance is very healthy coming from these new to bank customers. So we don't see any change. We just don't want people to say that every month is going to be like 100,000 number because this like almost like a ticker number because that's what the trend was. There will be fluctuations and changes month to month and quarter to quarter, but nothing material to call out as such. OK, thank you very much, Alistair.
Alistair
We'll take Kendra Yan at CICC next.
Kendra Yan
Yeah, thanks for taking my question. My question is kind of related to. Macro side as the newly nominated US Federal Reserve Chair has proposed interest rate cuts and balance sheet reduction. Could you please? Share your macro assumption behind the future three years guidance and are there any risks that we need to pay attention to? Thanks.
George El Hedary
Yes, thank you, Kendra. We can, we can do that, Pam.
Pam
Yeah. So just as I'd said earlier, Kendra, when we look at our guidance, we look at plausible downside scenarios that include interest rate cuts, both quantum as well as duration. This time around, as we said, the starting point for the guidance for this year was the January year and cuts. But we also stress test our portfolios on a regular basis for a range of scenarios and we consider those and the impact on EC LS also on a weighted average basis. When we look at our overall portfolios, we have looked at the some of the macro. You know I would say recent news whether it's to do with private credit or otherwise because as I said earlier, we look at 2nd and 3rd order risks that may come from some sort of a macro event or issue even though our own underwriting practices very stringent and very rigorous in this respect.
What I will say is that despite the the evolving scenarios that we are facing on tariffs and trade, our business has been really quite resilient and that has overall it is up 2% year on year in 2025 in a complex market. As this landscape evolves, our relationships and engagement with clients gets even stronger. We have taken market share in corridors through with in Hong Kong, UK, Asia overall as supply chains are moving and corridors are shifting. So I would say overall, if I think in a macro sense, there are headwinds and tailwinds as well As for the for the world at large, but also for HSBC, We look at specific idiosyncratic factors that could impact us, any risk concentrations we may have in our home markets. And that's all part of our guidance.
And that's why I said to you earlier or to the earlier question that when we give our guidance and our targets, we like to be rightfully conservative. But the most important thing is through this. We have made an assumption that we will continue to invest for growth. We have the right strategy. We have the right priorities. We have the focus to retain and win market share and we will continue to do that with the basic underlying principle that George called out earlier. We are here to serve our customers and is the strength of our relationship with our customers that gives us the confidence for our guidance and targets. Perfect. Very good, Andrew. Thank you.
Alistair
Yeah, thank you, George. So we'll just take a final question today from Catherine Leigh, JP Morgan.
Catherine Leigh
Oh, thank you. Hi. Thank you for taking the last questions from me. OK. My question is due on revenue side, right. I think the 5% revenue growth in 2028 and then the above 70% royalty guidance, I think there's two key drivers. One will be on Nii and the other will be on well. But my question is that Nii, what is like what give HSPC the confidence then on the sustainability of? The deposit growth because one trend we know that is that say for example, in China. With RMB appreciations and also China start to texting its citizen globally, will that actually slow down, say, for example, Chinese nationals coming to Hong Kong to open new accounts and then the money flow movement.
So can can we be more a bit specific on what are the key drivers and then the key path on the deposit growth? This is #1 #2 I think is still on number 2 is on wealth and on that trends, right? So what do you think that will have an impact on our wealth as well? Thank you.
George El Hedary
OK, thank you very much, Catherine. Let me address them in reverse order. I'll, I'll, I'll speak a little bit about wealth and I'll share some thoughts about deposits and, and Pam can give you additional granularity to, to address your question. Wealth remains structurally a very important growth opportunity for HSBC. As we said specifically that we're aligning our wealth footprint, Asian Middle East to where the wealth is growing fastest in the world in Asia and the Middle East. Also ability to capture wealth all the way from the premier customer base, which is the affluent middle class all the way to the high net worth means we have a better catchment of all these opportunities.
We're also present in the number of onshore markets such as China onshore. We are the leading international wealth manager in China, mainland China onshore, which is not dependent to floors outside China. For instance, we're investing in India. We of course have a big wealth hubs in places such as Hong Kong, of course, Singapore, the UAE and the number of other markets. The challenges possibly to, you know, to, to anticipate is, is there is a turn around or a change in the overall outlook of investment. Because inevitably wealth will depend on the underlying performance of the invested invested markets.
And, and, and, and if there, you know, there is today, there is a strong resilience in these markets, which is what we're, you know, what we're, you know, our customers are also looking at. But that is of course always a risk that we need to be watchful of. We're also investing to gain share. We're investing to diversify the product offering and to diversify the wrapper offering all the way from insurance to asset management to other forms of brokerage etcetera, so that we are able to meet the varying. Wealth customers needs in how they look at their investment requirement.
Finally, we're also investing in generational generational wealth, so specifically supporting transfer to the youth or the next generation or transfer between wealth centres. In a way our footprint allows us to do that is competitively a very strong compared to a number of our peers who are offering wealth from very, very few, a number of hops. OK, that's the wealth. Now with regards deposits, Spam will give you a better answer in the details you're asking for. But let me tell you one thing about deposit. It is the foundational product on which our customers trust is expressed with HSBC and this is how we look at it.
Customers trust us with their deposit. That's the starting point of any possible service and proposition in transaction, banking, payment, financing and otherwise. So we cherish this asset class. We have always cherished it through thick and through thin, in good rates and bad rates. And we will always focus on what it takes to make sure our customers trust us, the financial strength, the level of service so that we earn their trust with their deposits. When you look at our deposit base, it has grown in every business, it has grown and we are highly surplus liquidity in every currency, every major currency in every major geography.
So there is a deep rooted across our four businesses and across all the geographies where we operate, a deep rooted trust which we nurture to support customers, you know giving us their deposits and using us as their deposit bank by preference or by excellence that can support if you want, our outlook on our deposit growth. Thank you, George and Catherine, really good question to close on.
Pam
We have seen deposit growth as you've seen in our new disclosures and wealth across the spectrum of our customer base, premier private bank retail in every market in every jurisdiction even when there isn't our home market. And that really underpins the growth that we are seeing in our banking Nii. We have taken very conservative trajectory on loan growth. I'm hopeful at some stage loan growth will also pick up, which will then also support the Banking Nii. If from an interest rate perspective, the timing of the interest rate becomes a headwind in one of those plausible downside scenarios, we have a structural hedge which is continuing to be a tailwind given all the work we did a few years ago.
We will also continue to build on the structural hedge even though the largest increases we've done, I have been behind us now. So if I look at all of these things in the round and I look at the momentum of the business that we have seen in the first of seven weeks of this year, that gives us confidence for our banking Nii guidance for 2026. If you underpin that just based on the fourth quarter, obviously it'll give you a number of 46, but we are not calling that out because we are very cognizant of the headwinds on interest rates.
And you're right, you know the interest rates in the US is down 50 basis points, UK 25 basis points just here to date with further two to three rate cuts to happen. So with that, I think in the round we feel very confident that the banking AI, which is again the trust of our customers and what we are doing everything to preserve their trust and to build on those relationships. Because I'll just end with one thing, we are fundamentally a relationship bank. We have a full service suite of products we offer to our customers. So for our guidance for our targets, we look at that full range. We are not a product proposition based bank, in which case some of the comments you made would obviously be a bigger headwind. Perfect.
George El Hedary
Thank you, Pam and thank you Catherine for your last question. Thank you everyone for joining us. We are pleased to report strong revenues, strong profits, strong returns and strong distribution to our shareholders. We are confident we can navigate the challenges ahead of us from a position of strength. And this has allowed us to put ambitious targets about our revenue growing every year for 26/27/28, rising to 5% in 28 as well as I would return on tangible equity delivering 17 percent or better every year over that. With a 50% dividend payout ratio, all excluding notable item. Thank you very much for joining us this morning with this afternoon and I hope you have a good day. Thank you.
Operator
Thank you, ladies and gentlemen, for joining today's webinar. You may now disconnect.
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