HSBC reported a 4% rise in underlying first-quarter revenue to $19.1bn, which ignores currency and one-off items. Growth was driven by banking net interest income and a strong showing from the wealth business.
Underlying profit before tax was broadly stable at $10.1bn ($10.0bn expected). Credit impairments rose 41% to $1.3bn, including a fraud-related charge and additional allowances linked to uncertainty around the Middle East conflict.
The CET1 ratio, a key measure of financial resilience, was 14.0% at the end of the quarter (14.0-14.5% target range). A first interim dividend of $0.10 per share was announced.
2026 guidance now points to banking net interest income of around $46bn, up from previous guidance of at least $45bn and slightly ahead of consensus at $45.8bn.
The shares fell 5.2% in early trading.
Our view
HSBC’s first quarter was a little messy, with performance ahead of expectations after stripping out disposal noise. The upgraded full-year net interest income guidance echoes peers’ more reassuring tone, suggesting HSBC’s income engine still has fuel in the tank beyond higher rates alone. But stronger revenue was largely absorbed by higher credit losses and cost pressure, and that’s what markets focused on.
The recent Hang Seng purchase received further attention during the results call. Buybacks are still on the back burner, with a potential return in the next quarter or two, reliant on capital levels. There’s still pressure to deliver the expected $0.9bn in benefits, considering integration costs are expected to come in at a hefty $0.6bn.
Efforts to refocus the business on higher growth areas continue. HSBC has already made several disposals and is actively looking at other ways to streamline. Latest plans involve reducing costs by around $3bn ($3.3bn with Hang Seng savings) in the coming years, with around half passing through to the profit line and half reinvested.
Traditional banking is the key driver of income, but finding growth has been a bugbear. Loan growth is low and expected to remain so, but there is a tailwind from deposit growth. That puts most of the heavy lifting on the higher-growth fee-income business if HSBC wants to hit its new medium-term targets.
This includes areas like trading and wealth management. Interest rates and consumer confidence still impact some of those income streams, but not to the extent of more traditional banking operations. The diversification is welcome, and the Asian focus is a positive in areas like wealth management, which is a high-growth part of the market. HSBC has leadership positions, so it looks well placed to benefit.
Capital levels are solid, though, as mentioned, there will be a period now of rebuilding the buffer. We are also keeping an eye on non-performing loans; HSBC has historically been seen as a leader among its Asian peers, but a tick higher in recent years has eroded that position. Credit quality also needs watching, though this quarter’s pressure was more about an isolated issue and extra Middle East caution than broad-based deterioration. We aren’t too concerned, but it’s something to monitor.
The global focus is a differentiator from many of its peers, and HSBC is our preferred UK-listed name for Asian exposure. That said, we think UK-focused banks have a much clearer path to growth over the medium term.
Environmental, Social and Governance (ESG) risk
The financials sector is medium-risk in terms of ESG. Product governance is the largest risk for most companies, especially those in the US and Europe with enhanced regulatory scrutiny. Data privacy and security is also an increasingly important risk for banks and diversified financial firms. Business ethics, ESG integration and labour relations are also worth monitoring.
According to Sustainalytics, HSBC’s management of material ESG issues is strong.
HSBC faces risks from business ethics and product governance due to its involvement in related lawsuits and investigations. The $1.1bn provision set aside for the Madoff case is an example of a legacy issue working through the system, though at around 0.5% of the groups market cap it’s not a huge dial mover.
Policies against money laundering, bribery, and corruption also have gaps. Although HSBC's credit and loan standards generally meet industry norms, its approach to client engagement on climate issues, particularly in Asia, lacks sufficient evidence.
HSBC key facts
All ratios are sourced from LSEG Datastream, based on previous day’s closing values. Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn’t be looked at on their own – it’s important to understand the big picture.
This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by LSEG. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.
This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment.