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HSBC reported Q2 pre-tax profit of $10.1B, up 60.4% y/y on higher revenues and lower costs.
HSBC approved a 10-cent interim dividend and plans a share buyback of up to $1B.
HSBC expects at least $46B in 2026 banking NII and targets 17% or better tangible equity returns.
HSBC Holdings (HSBC - Free Report) reported second-quarter 2026 pre-tax profit of $10.1 billion, which increased 60.4% from the prior-year quarter, primarily reflecting a net favorable impact from notable items of $2.6 billion.
Results were aided by an improvement in revenues and a decline in expenses. A fall in expected credit losses and other credit impairment charges (ECL) also supported the results to an extent.
HSBC’s Revenues Improve, Expenses Fall
Total revenues were $19.12 billion, up 16.1% year over year. The rise was driven by higher net interest income, net fee income and other operating income.
Total operating expenses declined 2.4% year over year to $8.71 billion. The decline reflected lower restructuring costs together with the resultant cost reduction benefits from the organizational simplification, and the phasing of performance-related pay accrual relative to second-quarter 2025. These reductions were partly offset by higher planned spend and investment in technology, the impact of inflation and an adverse impact from foreign currency translation differences of $0.1 billion.
In the quarter under review, ECL was $1.05 billion, down 1.2% from the prior-year quarter. The charge in the reported quarter primarily comprised stage 3 charges, including $0.2 billion related to the Hong Kong CRE sector.
The common equity tier 1 (CET1) ratio, as of June 30, 2026, was 14.1%, down from 14.9% as of Dec. 31, 2025. The leverage ratio was 4.9%, down from 5.3% as of Dec. 31, 2025.
HSBC’s Quarterly Performance by Business Lines
The Hong Kong Business: The segment reported $2.55 billion in pre-tax profit, up 24% 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 $1.69 billion, up 2.8% from the year-ago quarter. A rise in revenues and lower expenses resulted in the increase.
Corporate and Institutional Banking: Pre-tax profit was $3.91 billion, which increased 30.2% year over year. The rise was driven by higher revenues and lower expenses.
International Wealth and Premier Banking: Pre-tax profit was $1.39 billion, which increased 53.2% year over year. The rise was driven by higher revenues and lower ECL.
Corporate Centre: The segment reported a pre-tax profit of $612 million against a pre-tax loss of $1.28 billion in the year-ago quarter.
HSBC’s Capital Distribution Update
The company’s board of directors approved a second interim dividend of 10 cents per share. Also, HSBC intends to initiate a share buyback of up to $1 billion, which is expected to be completed by the third-quarter 2026 result announcement.
HSBC Management’s Outlook
For 2026, management expects banking net interest income (NII) of at least $46 billion.
ECL charges as a percentage of average gross loans are expected to be 45bps in 2026 (including held-for-sale loan balances). 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.
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.
HSBC Holdings plc Price, Consensus and EPS Surprise
Barclays (BCS - Free Report) reported second-quarter 2026 net income attributable to ordinary equity holders of £2.26 billion ($3.03 billion), up 36% 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 first-quarter fiscal 2027 (ended June 30, 2026) was INR148.05 billion ($1.56 billion), up 16% 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 hurt the results to some extent.
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HSBC Q2 Pre-Tax Earnings Improve Y/Y on Higher Revenues, Lower Costs
Key Takeaways
HSBC Holdings (HSBC - Free Report) reported second-quarter 2026 pre-tax profit of $10.1 billion, which increased 60.4% from the prior-year quarter, primarily reflecting a net favorable impact from notable items of $2.6 billion.
Results were aided by an improvement in revenues and a decline in expenses. A fall in expected credit losses and other credit impairment charges (ECL) also supported the results to an extent.
HSBC’s Revenues Improve, Expenses Fall
Total revenues were $19.12 billion, up 16.1% year over year. The rise was driven by higher net interest income, net fee income and other operating income.
Total operating expenses declined 2.4% year over year to $8.71 billion. The decline reflected lower restructuring costs together with the resultant cost reduction benefits from the organizational simplification, and the phasing of performance-related pay accrual relative to second-quarter 2025. These reductions were partly offset by higher planned spend and investment in technology, the impact of inflation and an adverse impact from foreign currency translation differences of $0.1 billion.
In the quarter under review, ECL was $1.05 billion, down 1.2% from the prior-year quarter. The charge in the reported quarter primarily comprised stage 3 charges, including $0.2 billion related to the Hong Kong CRE sector.
The common equity tier 1 (CET1) ratio, as of June 30, 2026, was 14.1%, down from 14.9% as of Dec. 31, 2025. The leverage ratio was 4.9%, down from 5.3% as of Dec. 31, 2025.
HSBC’s Quarterly Performance by Business Lines
The Hong Kong Business: The segment reported $2.55 billion in pre-tax profit, up 24% 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 $1.69 billion, up 2.8% from the year-ago quarter. A rise in revenues and lower expenses resulted in the increase.
Corporate and Institutional Banking: Pre-tax profit was $3.91 billion, which increased 30.2% year over year. The rise was driven by higher revenues and lower expenses.
International Wealth and Premier Banking: Pre-tax profit was $1.39 billion, which increased 53.2% year over year. The rise was driven by higher revenues and lower ECL.
Corporate Centre: The segment reported a pre-tax profit of $612 million against a pre-tax loss of $1.28 billion in the year-ago quarter.
HSBC’s Capital Distribution Update
The company’s board of directors approved a second interim dividend of 10 cents per share. Also, HSBC intends to initiate a share buyback of up to $1 billion, which is expected to be completed by the third-quarter 2026 result announcement.
HSBC Management’s Outlook
For 2026, management expects banking net interest income (NII) of at least $46 billion.
ECL charges as a percentage of average gross loans are expected to be 45bps in 2026 (including held-for-sale loan balances). 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.
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.
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 #2 (Buy). 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 second-quarter 2026 net income attributable to ordinary equity holders of £2.26 billion ($3.03 billion), up 36% 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 first-quarter fiscal 2027 (ended June 30, 2026) was INR148.05 billion ($1.56 billion), up 16% 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 hurt the results to some extent.