HSBC Misses Q1 Profit Estimates as Credit Losses Climb

CNBC reported Tuesday that HSBC, Europe’s largest lender, posted a first-quarter pre-tax profit of $9.4 billion, falling short of the $9.59 billion analysts had expected. The shortfall was driven by a jump in expected credit losses and other impairment charges.

Revenue Beat Could Not Offset Rising Impairments

HSBC Q1 profit declined 1% compared with the same quarter a year ago, edging down from $9.5 billion. Revenue, however, came in at $18.62 billion, ahead of the $18.49 billion consensus estimate. Stronger wealth fee income and other revenue streams powered that top-line beat.

The bank’s expected credit losses reached $1.3 billion for the quarter. That figure was $400 million higher than the prior-year period. HSBC attributed the increase to exposure tied to a UK financial sponsor and to provisions set aside amid a deteriorating global economic outlook driven by ongoing Middle East conflict.

Net interest income rose 8% year on year to $8.9 billion. Operating expenses also climbed 8%, reflecting inflationary pressures, currency headwinds, higher planned investment and increased performance-related pay.

Background: Cost Cuts and Hang Seng Consolidation

HSBC has been executing a cost-reduction programme targeting $1.5 billion in annualised savings by the end of June 2026. The bank said Tuesday it remains on track to hit that goal.

Earlier this year, HSBC completed the privatisation of Hang Seng Bank on January 26, with Hang Seng shares subsequently delisted from the Hong Kong Stock Exchange. HSBC expects the consolidation to generate around $500 million in combined pre-tax revenue and cost synergies across both brands in Hong Kong by 2028.

Hong Kong-listed HSBC shares fell 3.7% following the earnings release.

Middle East Risks Cloud Full-Year Outlook

The bank flagged a set of downside scenarios tied to the Middle East situation. Should the conflict intensify, HSBC warned that higher oil prices, sharper inflation and a material GDP slowdown could combine to deliver a mid-to-high single-digit percentage hit to full-year profit before tax.

HSBC maintained its return on tangible equity target of 17% for 2026. Annualised RoTE in the first quarter came in at 17.3%. The bank cautioned that a materialisation of Middle East adverse effects could push RoTE below that 17% threshold for the full year.

The board approved a first interim dividend of 10 cents per share for 2026.

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