HSBC sees profit plunge due to rising bad loans in China

In the first half of 2025, HSBC, the largest bank in Europe, faced significant challenges as pre-tax profits fell by 26 percent. This decline was primarily attributed to increasing bad loans in China, as the bank had to write down the value of its stake in the Shanghai-based Bank of Communications. The pre-tax profit for this period was reported at $15.8 billion, a decline from $21.6 billion recorded in the same period the previous year. These figures have raised concerns about the ongoing financial stability and operational challenges faced by the new chief executive of the bank. In light of these developments, HSBC announced plans to initiate a buyback of $3 billion of its own shares. This move is strategically aimed at bolstering investor confidence amid the challenging economic conditions tied to the deteriorating loan portfolio in the Chinese market. The writing down of asset values reflects the potential risks that international banks face when expanding operations in regions susceptible to economic downturns, notably China, which has been grappling with increasing debt and defaults. Meanwhile, the broader market sentiment was notably cautious as stock markets across Asia exhibited mixed performances, primarily due to apprehensions surrounding forthcoming central bank interest rate decisions and the impending tariff deadline set by the U.S. This atmosphere of uncertainty was compounded by tsunami warnings in the Pacific region, further affecting market dynamics and investor confidence. The challenges at HSBC correlate with wider trends observed within the financial landscape as companies adapt to evolving economic pressures, such as the impact of tariffs, particularly those affecting operations in the United States and Europe. GSK and BAE Systems also reported their earnings, indicating varying responses to current market conditions, but the focus for many investors has remained on HSBC as it confronts these significant financial hurdles.