HSBC Shares Slide After Q1 Profit Miss on Rising Credit Losses

CNBC reported Tuesday that HSBC posted first-quarter pre-tax profit of $9.4 billion, falling just short of the $9.59 billion analysts had pencilled in. The miss was driven primarily by a sharp rise in HSBC credit losses, which weighed on an otherwise solid revenue performance.

Revenue Beats but Profit Disappoints

Group revenue climbed 6% year on year to $18.62 billion, edging past consensus expectations. Net interest income also rose 8%, reaching $8.9 billion for the quarter. Despite those gains, pre-tax profit slipped 1% from the $9.5 billion recorded in the same period of 2025. Operating expenses rose 8%, reflecting inflation, currency movements, higher planned investment and increased performance-related pay.

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Credit Losses Surge on Fraud and Middle East Risks

Expected credit losses reached $1.3 billion for the quarter, running $400 million above the prior year figure and roughly 9% worse than analyst forecasts, according to a Citi assessment. HSBC attributed the charges to fraud-related exposure involving a UK-based financial sponsor and to provisions reflecting a deteriorating economic outlook tied to the Middle East conflict. Chief Financial Officer Pam Kaur told CNBC she remained confident in the provision level, saying the bank had modelled a range of plausible downside scenarios and felt well covered at the current charge.

Background: HSBC’s Ongoing Restructuring Push

Europe’s largest lender has been reshaping its business amid persistent cost pressure and shifting geopolitical risk. HSBC completed the privatisation of Hang Seng Bank in late January, with that subsidiary subsequently delisted from the Hong Kong Stock Exchange. The bank expects to extract $500 million in combined pre-tax revenue and cost synergies from that deal across its Hong Kong brands by 2028. Separately, management reiterated a target of $1.5 billion in annualised cost reductions by the end of June 2026, with Hang Seng synergy benefits expected to begin flowing in the second half of this year.

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Shares Slide; Dividend Approved

Markets responded sharply to the earnings shortfall. HSBC’s Hong Kong-listed shares fell 4.6%, while its London-listed stock dropped 5.5% in early trading. The bank maintained its return on tangible equity target of 17%, though it cautioned that a severe escalation of Middle East tensions could push that metric below the threshold for 2026. Annualised RoTE, excluding notable items, came in at 18.7% for the quarter. The board approved an interim dividend of 10 cents per share for the period.

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