HSBC Misses Q1 Profit Estimates as Credit Losses Climb

CNBC reported Tuesday that HSBC posted first-quarter pre-tax profit of $9.37 billion, falling short of the $9.59 billion analysts had expected. The miss pushed Hong Kong-listed shares of Europe’s largest lender down 4.6% on the day.

Revenue Beat Could Not Offset the Credit Loss Drag

HSBC first-quarter profit slipped roughly 1% from the same period a year ago. Revenue, however, told a brighter story. The bank generated $18.62 billion in top-line income, beating the consensus estimate of $18.49 billion. Stronger wealth management fees and other non-interest income drove that outperformance.

Net interest income also grew 8% year on year to $8.9 billion. Operating expenses rose by the same rate, reflecting inflationary pressures, currency moves, higher planned investment, and increased performance-linked pay.

Credit Losses Were the Central Problem

Expected credit losses reached $1.3 billion for the quarter, a $400 million increase compared with the prior-year period. A Citi note flagged the figure as roughly 9% worse than consensus. HSBC attributed the elevated provisions to two factors: direct exposure to a UK-based financial sponsor, and a broader precautionary build against the worsening economic backdrop created by the Middle East conflict.

Chief Financial Officer Pam Kaur told CNBC she remains comfortable with the $1.3 billion charge given the bank’s forward scenarios. “I feel quite comfortable that at a $1.3 billion charge based on what we know today and the forward outlook we have of various downside plausible scenarios, we are well provided for,” Kaur said.

Background: Cost Cuts, Hang Seng, and a Profitability Target

HSBC has been executing a restructuring drive aimed at delivering $1.5 billion in annualized cost savings by the end of June 2026. One significant piece of that strategy was completing the privatization of Hang Seng Bank in late January, which saw Hang Seng shares delisted from the Hong Kong Stock Exchange. HSBC expects the move to yield $500 million in combined pre-tax revenue and cost synergies across both brands in Hong Kong by 2028.

The bank maintained its return on tangible equity target of 17%. Annualized RoTE for the quarter, excluding notable items, came in at 18.7%. HSBC did warn, however, that a full materialization of Middle East downside risks could drag RoTE below 17% in 2026.

Dividend Approved Despite the Earnings Miss

The HSBC board declared a first interim dividend of 10 cents per share for 2026. The bank also cautioned that an escalation of Middle East tensions could push oil prices higher, stoke inflation, and meaningfully slow GDP growth. Those factors, it warned, could create a mid-to-high single-digit percentage drag on annual profit before tax.

Read Next: Fed Holds Rates Steady as Powell Flags Tariff Uncertainty