HSBC Falls Short of Profit Projections Despite Revenue Increase, Highlights Growing Credit Risks
HSBC announced a first-quarter profit that fell short of expectations, as increased credit losses countered robust revenue growth, leading to a decline in its shares during early trading.
HSBC, Europe’s largest lender, reported on Tuesday a first-quarter pre-tax profit that did not meet analysts’ expectations, impacted by increased credit losses and impairment charges, even with stronger revenues.
The bank reported a pre-tax profit of $9.37 billion, falling short of the $9.59 billion anticipated by analysts. However, revenue increased by 6 percent year over year to $18.62 billion, surpassing estimates of $18.49 billion, driven by stronger wealth management fees and additional income sources.
HSBC reported a 1 percent decline in profit before tax compared to the same period last year, leading to a negative reaction in its shares following the results. The lender’s shares listed in Hong Kong declined by 4.6 per cent, whereas its stock listed in the UK fell by 5.2 per cent during early trading in London.
A significant factor affecting performance was an increase in anticipated credit losses, which rose to $1.3 billion—approximately $400 million more than the previous year and 9 percent above consensus estimates, as reported by analysts. The bank linked the rise to its engagement with a financial sponsor in the United Kingdom, as well as wider provisions related to increased uncertainty and a worsening economic outlook influenced by the conflict in the Middle East.
HSBC’s chief financial officer, Pam Kaur, conveyed assurance regarding the bank’s provisioning levels, even amidst the recent increase.
“I feel quite confident that with a $1.3 billion charge, based on our current knowledge and the forward outlook we have regarding various plausible downside scenarios, we are well prepared,” Kaur stated in an interview with CNBC’s Access Middle East on Tuesday.
The lender reaffirmed its commitment to cost-cutting, indicating it is on course to achieve $1.5 billion in annualized cost reductions by the end of June 2026.
“HSBC stated that through the privatization of Hang Seng Bank, we anticipate achieving $0.5 billion in pre-tax revenue and cost synergies across both our brands in Hong Kong by the end of 2028.”
The bank finalized the privatization of Hang Seng Bank on January 26, following which the subsidiary’s shares were removed from the Hong Kong Stock Exchange.
HSBC reported an 8 percent increase in net interest income to $8.9 billion in the first quarter, reflecting improved margins. Operating expenses increased by 8 percent, influenced by inflationary pressures, foreign exchange impacts, higher planned investments, and performance-related pay.
As we look to the future, the bank has identified considerable risks associated with the ongoing conflict in the Middle East. It cautioned that prolonged disruptions may lead to increased oil prices, heightened inflation, and a more pronounced slowdown in global economic growth.
HSBC warned that should these adverse scenarios come to pass, they might result in a “mid-to-high single-digit percentage” decline in its pre-tax profit.
The bank has upheld its return on tangible equity (RoTE) target of 17 per cent; however, it cautioned that unfavorable geopolitical developments might pull the metric below this threshold in 2026, potentially impacting its overall financial stability and shareholder returns. In the first quarter, RoTE was recorded at 18.7 per cent, excluding notable items.
Even with a cautious perspective, analysts observed that the bank continues to exceed its medium-term profitability targets.
HSBC’s board has approved its first interim dividend for 2026, set at 10 cents per share, signaling ongoing returns for shareholders.
