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Results were primarily hurt by an increase in expected credit losses and other credit impairment charges (ECL), along with an increase in operating expenses. However, a rise in revenues supported the results to some extent.
HSBC’s Revenues Improve, Expenses Rise
Total revenues were $18.62 billion, up 5.5% year over year. The rise was primarily driven by higher net interest income, net fee income and other operating income.
Total operating expenses (excluding amortization and impairment of intangible assets) increased 6.8% year over year to $8 billion.
In the quarter under review, ECL was $1.3 billion, up 48.5% from the prior-year quarter. The charge in the reported quarter primarily reflected a $0.4-billion fraud-related, secondary, securitization exposure with a financial sponsor in the U.K. in the Corporate and Institutional Banking business, as well as a $0.3-billion increase in allowances to reflect heightened uncertainty and a deterioration in the forward economic outlook due to the Middle East conflict.
The common equity tier 1 (CET1) ratio, as of March 31, 2026, was 14%, down from 14.9% as of Dec. 31, 2025. The leverage ratio was 5%, down from 5.3% as of Dec. 31, 2025.
HSBC’s Quarterly Performance by Business Lines
The Hong Kong Business: The segment reported $2.59 billion in pre-tax profit, up 4.7% from the year-ago period. The rise was driven by higher revenues and lower ECL.
The UK Business: The segment reported a pre-tax profit of $1.65 billion, up 12% from the year-ago quarter. A rise in revenues resulted in the increase.
Corporate and Institutional Banking: Pre-tax profit was $3.34 billion, which declined 9.1% year over year. The fall was due to higher ECL and higher expenses.
International Wealth and Premier Banking: Pre-tax profit was $1.23 billion, which increased 3.6% year over year. The rise was driven by higher revenues and lower ECL.
Corporate Centre: The segment reported a pre-tax profit of $571 million, down 15.8% from the year-ago quarter.
HSBC’s Capital Distribution Update
The company’s board of directors approved a first interim dividend of 10 cents per share for 2026.
HSBC Management’s Outlook
For 2026, management expects banking net interest income (NII) of at least $46 billion, changed from the prior guidance of $45 billion. The increase reflects an improved interest rate outlook.
ECL charges as a percentage of average gross loans are expected to be 45bps in 2026 (including held-for-sale loan balances), changed from the prior outlook of 40 bps. Over the medium term, the company plans to retain 30-40bps.
The company projects growth in target basis operating expenses of 1% for 2026 from that reported in 2025.
Management expects growth in revenues from 2026 to 2028, rising to 5% growth in 2028 from 2027.
HSBC expects a return on average tangible equity of 17% or better for 2026, 2027 and 2028, excluding notable items.
The company intends to manage the CET1 ratio within its medium-term target of 14-14.5%.
The dividend payout ratio on a target basis is expected to be 50% in 2026, 2027 and 2028, excluding material notable items and related impacts.
The company expects to have taken action to deliver the $1.5-billion organizational simplification savings by the first half of 2026, six months ahead of plan.
Following the privatization of Hang Seng Bank, reported cost synergies across HSBC and Hang Seng Bank are expected to release $0.3 billion. To reflect this, HSBC increased its medium-term cost reallocation commitment from $1.5 billion to $1.8 billion.
Through the privatization of Hang Seng Bank, HSBC expects to realize $0.5 billion in pre-tax revenues and cost synergies across both brands in Hong Kong by the end of 2028. HSBC expects to incur associated restructuring costs of $0.6 billion, of which one-off income statement impacts would be reported as material notable items. The bank has an ambition to generate further revenue and cost opportunities of $0.4 billion by the end of 2028.
Our View on HSBC
HSBC’s strong capital position, a global network and business-simplification initiatives are expected to support its financials. As part of its focus on optimizing returns, the company is divesting operations in underperforming regions and has exited retail banking across multiple markets. These moves position it for improved operating efficiency. However, higher expenses and rising ECL charges are concerning.
HSBC Holdings plc Price, Consensus and EPS Surprise
Barclays (BCS - Free Report) reported first-quarter 2026 net income attributable to ordinary equity holders of £1.93 billion ($2.60 billion), up 4% from the prior-year quarter.
An increase in revenues and a strong balance sheet supported BCS’ results. However, the company recorded higher operating expenses in the quarter, which, along with an increase in credit impairment charges, hurt the results to some extent.
ICICI Bank Ltd.’s (IBN - Free Report) profit after tax for fourth-quarter fiscal 2026 (ended March 31) was INR137.02 billion ($1.50 billion), up 8.5% from the prior-year quarter.
IBN’s results were aided by growth in net interest income and non-interest income. A decline in provisions was a tailwind. However, higher operating expenses, along with a treasury loss, hurt the results to some extent.
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HSBC Q1 Pre-Tax Earnings Decline Y/Y on Higher ECL, Expenses
Key Takeaways
HSBC Holdings (HSBC - Free Report) reported first-quarter 2026 pre-tax profit of $9.38 billion, which declined 1.1% from the prior-year quarter.
Results were primarily hurt by an increase in expected credit losses and other credit impairment charges (ECL), along with an increase in operating expenses. However, a rise in revenues supported the results to some extent.
HSBC’s Revenues Improve, Expenses Rise
Total revenues were $18.62 billion, up 5.5% year over year. The rise was primarily driven by higher net interest income, net fee income and other operating income.
Total operating expenses (excluding amortization and impairment of intangible assets) increased 6.8% year over year to $8 billion.
In the quarter under review, ECL was $1.3 billion, up 48.5% from the prior-year quarter. The charge in the reported quarter primarily reflected a $0.4-billion fraud-related, secondary, securitization exposure with a financial sponsor in the U.K. in the Corporate and Institutional Banking business, as well as a $0.3-billion increase in allowances to reflect heightened uncertainty and a deterioration in the forward economic outlook due to the Middle East conflict.
The common equity tier 1 (CET1) ratio, as of March 31, 2026, was 14%, down from 14.9% as of Dec. 31, 2025. The leverage ratio was 5%, down from 5.3% as of Dec. 31, 2025.
HSBC’s Quarterly Performance by Business Lines
The Hong Kong Business: The segment reported $2.59 billion in pre-tax profit, up 4.7% from the year-ago period. The rise was driven by higher revenues and lower ECL.
The UK Business: The segment reported a pre-tax profit of $1.65 billion, up 12% from the year-ago quarter. A rise in revenues resulted in the increase.
Corporate and Institutional Banking: Pre-tax profit was $3.34 billion, which declined 9.1% year over year. The fall was due to higher ECL and higher expenses.
International Wealth and Premier Banking: Pre-tax profit was $1.23 billion, which increased 3.6% year over year. The rise was driven by higher revenues and lower ECL.
Corporate Centre: The segment reported a pre-tax profit of $571 million, down 15.8% from the year-ago quarter.
HSBC’s Capital Distribution Update
The company’s board of directors approved a first interim dividend of 10 cents per share for 2026.
HSBC Management’s Outlook
For 2026, management expects banking net interest income (NII) of at least $46 billion, changed from the prior guidance of $45 billion. The increase reflects an improved interest rate outlook.
ECL charges as a percentage of average gross loans are expected to be 45bps in 2026 (including held-for-sale loan balances), changed from the prior outlook of 40 bps. Over the medium term, the company plans to retain 30-40bps.
The company projects growth in target basis operating expenses of 1% for 2026 from that reported in 2025.
Management expects growth in revenues from 2026 to 2028, rising to 5% growth in 2028 from 2027.
HSBC expects a return on average tangible equity of 17% or better for 2026, 2027 and 2028, excluding notable items.
The company intends to manage the CET1 ratio within its medium-term target of 14-14.5%.
The dividend payout ratio on a target basis is expected to be 50% in 2026, 2027 and 2028, excluding material notable items and related impacts.
The company expects to have taken action to deliver the $1.5-billion organizational simplification savings by the first half of 2026, six months ahead of plan.
Following the privatization of Hang Seng Bank, reported cost synergies across HSBC and Hang Seng Bank are expected to release $0.3 billion. To reflect this, HSBC increased its medium-term cost reallocation commitment from $1.5 billion to $1.8 billion.
Through the privatization of Hang Seng Bank, HSBC expects to realize $0.5 billion in pre-tax revenues and cost synergies across both brands in Hong Kong by the end of 2028. HSBC expects to incur associated restructuring costs of $0.6 billion, of which one-off income statement impacts would be reported as material notable items. The bank has an ambition to generate further revenue and cost opportunities of $0.4 billion by the end of 2028.
Our View on HSBC
HSBC’s strong capital position, a global network and business-simplification initiatives are expected to support its financials. As part of its focus on optimizing returns, the company is divesting operations in underperforming regions and has exited retail banking across multiple markets. These moves position it for improved operating efficiency. However, higher expenses and rising ECL charges are concerning.
HSBC Holdings plc Price, Consensus and EPS Surprise
HSBC Holdings plc price-consensus-eps-surprise-chart | HSBC Holdings plc Quote
Currently, HSBC carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of HSBC’s Peers
Barclays (BCS - Free Report) reported first-quarter 2026 net income attributable to ordinary equity holders of £1.93 billion ($2.60 billion), up 4% from the prior-year quarter.
An increase in revenues and a strong balance sheet supported BCS’ results. However, the company recorded higher operating expenses in the quarter, which, along with an increase in credit impairment charges, hurt the results to some extent.
ICICI Bank Ltd.’s (IBN - Free Report) profit after tax for fourth-quarter fiscal 2026 (ended March 31) was INR137.02 billion ($1.50 billion), up 8.5% from the prior-year quarter.
IBN’s results were aided by growth in net interest income and non-interest income. A decline in provisions was a tailwind. However, higher operating expenses, along with a treasury loss, hurt the results to some extent.