HSBC, Europe’s largest financial institution, on Tuesday reported first-quarter pre-tax profits of $9.4 billion, lower than analysts expected on higher expected credit losses and other impairment charges.
HSBC’s revenue rose 6% year-on-year, beating expectations, due to higher wealth fees and other income.
Below is a comparison of HSBC’s first quarter results and the bank’s consensus forecasts.
Pre-tax profit: $9.37 billion vs. $9.59 billion Revenue: $18.62 billion vs. $18.49 billion
The company’s first-quarter pre-tax profit fell 1% year-on-year, and Hong Kong shares fell 4.6%. The company’s UK-listed shares were down 5.5% in the last session.
Expected credit losses were $1.3 billion, an increase of $400 million from the year-ago period and 9% worse than consensus expectations, Citi’s report said.
HSBC said in a statement that the credit losses were related to “fraud-related” exposures to UK financial sponsors and provisions due to heightened uncertainty from the Middle East conflict and a deteriorating economic outlook.
HSBC Chief Financial Officer Pam Kaul told CNBC’s “Access Middle East” on Tuesday: “Based on what we know today and the outlook for the future, which includes a range of possible downsides, we feel very comfortable that we are well-prepared for the $1.3 billion bill.”
HSBC said in a statement that it expects to realize annual cost savings of $1.5 billion by the end of June 2026. “Through the privatization of Hang Seng Bank, we expect to realize $500 million in pre-tax revenue and cost synergies across both brands in Hong Kong by the end of 2028.”
The lender completed the privatization of Hang Seng Bank on January 26, after which Hang Seng Bank’s shares were delisted from the Hong Kong Stock Exchange. HSBC expects some synergistic growth to begin in the second half of this year, Kaul said on an earnings call.
HSBC’s net interest income in the first quarter rose 8% year over year to $8.9 billion, with operating expenses also rising 8% due to inflation, foreign exchange, higher planned spending and performance-related compensation.
The lender highlighted risks from the Middle East conflict, including high oil prices, accelerating inflation and a significant slowdown in GDP, warning that if these factors were to come into play, pre-tax profits could be negatively impacted by a “mid to high single-digit percentage”.
HSBC maintained its target for return on tangible equity (a measure of profitability) at 17%, but warned that RoTE excluding notable items could fall below 17% in 2026 if the fallout from the Middle East crisis materializes. Annualized RoTE excluding reported quarter items was 18.7%.
Citi said the RoTE outlook does not appear to be a major cause for concern as the bank is already well ahead of its medium-term outlook of more than 17%.
The HSBC board also approved the first interim dividend of 10 cents per share in 2026.
