HSBC Holdings Maintains Strong Rating on Diverse Business Model and Solid Franchise

Fitch confirms HSBC's rating due to its solid franchise and diversified business model. The bank's revenues are primarily generated from retail banking and wealth management (42.3%), commercial banking (31.8%), and investment, financing, and market banking (25.9%). As of 2024, HSBC had $1.654.9 billion in current deposits and $930.6 billion in current credits.

Title: Fitch Ratings Confirms HSBC's Rating Amid Solid Financial Performance

Fitch Ratings has confirmed HSBC Holdings plc's rating, citing the bank's robust franchise and diversified business model. The decision comes amidst strong financial performance and a diversified revenue stream. As of 2024, HSBC had $1,654.9 billion in current deposits and $930.6 billion in current credits, indicating a solid financial foundation.

HSBC's revenue is primarily generated from retail banking and wealth management (42.3%), commercial banking (31.8%), and investment, financing, and market banking (25.9%) [1]. The bank's diversified revenue streams have contributed to its resilience in a challenging macroeconomic environment.

The confirmation of HSBC's rating underscores the bank's ability to manage capital efficiently and maintain a strong capital position. This is evident in the bank's ongoing share buyback program, which aims to boost earnings per share (EPS) by 1.1% to 2% over the next 12 months [2]. The buyback, priced above the volume-weighted average price (VWAP), signals management's belief that HSBC's shares are undervalued.

However, the long-term success of HSBC's strategy hinges on its ability to manage structural risks, particularly in its Hong Kong commercial real estate portfolio. The bank reported $1.07 billion in expected credit losses (ECL) for its Hong Kong commercial real estate portfolio in Q2 2025, driven by declining office rents and property values [2]. These risks are compounded by trade tensions and interest rate volatility, which could exacerbate credit migration in secured retail and office collateral.

To counterbalance these challenges, HSBC is investing heavily in AI and digital transformation, with over 600 AI use cases across risk management and customer service. These initiatives, coupled with a strategic pivot to wealth management and transaction banking—where fee growth is expected to be double-digit—offer a path to sustainable profitability. Additionally, HSBC's commitment to sustainable finance, targeting $750 billion to $1 trillion in support by 2030, aligns with long-term investor trends.

Investors should adopt a balanced approach, recognizing the immediate EPS uplift from the buyback while remaining cognizant of the structural challenges ahead. For those with a medium-term horizon, HSBC's strategic reallocation of capital and focus on high-growth markets present compelling upside potential.

References:
[1] https://www.ainvest.com/news/hsbc-significant-share-buyback-merrill-lynch-boosting-investor-confidence-2508/
[2] https://www.ainvest.com/news/hsbc-strategic-share-buy-driven-move-capital-reallocation-balance-sheet-strength-2508/