HSBC Misses Profit Estimates Despite Revenue Growth, Flags Rising Credit Risks

HSBC reported lower-than-expected first-quarter profit as higher credit losses offset strong revenue growth, sending its shares down in early trading.

Europe’s largest lender, HSBC, on Tuesday reported a first-quarter pre-tax profit that fell short of analysts’ expectations, weighed down by higher credit losses and impairment charges despite stronger revenues.

The bank posted pre-tax profit of $9.37 billion, below the $9.59 billion forecast by analysts, even as revenue rose 6 per cent year-on-year to $18.62 billion, beating estimates of $18.49 billion on the back of stronger wealth management fees and other income streams.

HSBC said profit before tax declined 1 per cent compared to the same period last year, with its shares reacting negatively to the results. The lender’s Hong Kong-listed shares fell 4.6 per cent, while its UK-listed stock dropped 5.2 per cent in early London trading.

A key drag on performance was a rise in expected credit losses, which climbed to $1.3 billion—about $400 million higher than a year earlier and 9 per cent above consensus estimates, according to analysts. The bank attributed the increase to exposure to a financial sponsor in the United Kingdom, alongside broader provisions tied to heightened uncertainty and a deteriorating economic outlook driven by the Middle East conflict.

Despite the uptick, HSBC’s Chief Financial Officer, Pam Kaur, expressed confidence in the bank’s provisioning levels.

“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 in an interview with CNBC’s Access Middle East on Tuesday.

The lender also reiterated its cost-cutting ambitions, stating it remains on track to deliver $1.5 billion in annualised cost reductions by the end of June 2026.

“Through the privatisation of Hang Seng Bank, we expect to realise $0.5bn in pre-tax revenue and cost synergies across both our brands in Hong Kong by the end of 2028,” HSBC said.

The bank completed the privatisation of Hang Seng Bank on January 26, after which the subsidiary’s shares were delisted from the Hong Kong Stock Exchange.

Operationally, HSBC reported an 8 per cent increase in net interest income to $8.9 billion in the first quarter, reflecting improved margins. However, operating expenses also rose by 8 per cent, driven by inflationary pressures, foreign exchange impacts, higher planned investments, and performance-related pay.

Looking ahead, the bank flagged significant risks tied to the ongoing Middle East conflict, warning that sustained disruptions could push up oil prices, accelerate inflation, and trigger a sharper slowdown in global economic growth.

HSBC cautioned that if these downside scenarios materialise, they could have a “mid-to-high single digit percentage” negative impact on its pre-tax profit.

While the bank maintained its return on tangible equity (RoTE) target of 17 per cent, it warned that adverse geopolitical developments could drag the metric below that level in 2026. RoTE stood at 18.7 per cent in the first quarter, excluding notable items.

Despite the cautious outlook, analysts noted that the bank remains ahead of its medium-term profitability guidance.

In a sign of continued shareholder returns, HSBC’s board approved its first interim dividend for 2026 at 10 cents per share.