HSBC Q1 Profit Misses on Rising Credit Losses

CNBC reported Tuesday that Europe’s largest bank posted first-quarter pre-tax profit of $9.4 billion. That figure fell short of analyst consensus and pushed HSBC shares sharply lower in both Hong Kong and London.

Credit Losses Drive the Miss

HSBC credit losses were the central problem. The bank set aside $1.3 billion in expected credit losses during the quarter. That figure was roughly $400 million higher than the same period last year. A Citi note described the provision as about 9% above what analysts had forecast. HSBC attributed a portion of the charge to exposure tied to a UK financial sponsor. Additional provisions reflected growing uncertainty stemming from the Middle East conflict. Chief Financial Officer Pam Kaur told CNBC she was comfortable the $1.3 billion charge was adequate given the current forward outlook. She said the bank had modelled several plausible downside scenarios in reaching that figure.

Revenue and Costs Both Moved Higher

The top line offered some relief. Revenue came in at $18.62 billion, a 6% year-on-year gain that edged past forecasts. Net interest income climbed 8% to $8.9 billion. Stronger wealth management fees and broader non-interest income drove the outperformance. Operating expenses also rose 8%, reflecting inflation, currency effects, higher planned investment, and increased performance-related pay. Pre-tax profit for the quarter was marginally below the $9.5 billion recorded a year earlier, a roughly 1% decline.

Background: Cost Cuts and Hang Seng Consolidation

HSBC entered 2026 midway through a significant restructuring programme. The bank said it remains on track to deliver $1.5 billion in annualised cost savings by the end of June. It completed the privatisation of Hang Seng Bank in late January, with that company’s shares delisting from the Hong Kong Stock Exchange shortly after. HSBC expects the consolidation to generate around $500 million in combined pre-tax revenue and cost synergies across its two Hong Kong brands by 2028.

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Outlook and Dividend

HSBC maintained its medium-term return on tangible equity target of 17%. Annualised RoTE for the quarter, excluding notable items, stood at 18.7%. However, the bank warned that if Middle East tensions escalate into higher oil prices and sharper inflation, the full-year RoTE could slip below that 17% threshold. Citi analysts noted the bank remains well ahead of its own guidance for now. The board approved a first interim dividend of 10 cents per share for 2026.

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