Second-quarter underlying revenue rose 7% to $19.0bn ($18.6bn expected), with growth driven by higher banking net interest income and strong fee income.
Underlying profit before tax rose 13% to $10.3bn. Credit impairments were broadly flat at $1.1bn.
The CET1 ratio, a key measure of financial resilience, was 14.1% at the end of the half (14.0-14.5% target range). A second interim dividend of $0.10 per share was announced alongside a new share buyback of up to $1bn.
Guidance now points to banking net interest income of ‘at least’ $46bn in 2026 (previously ‘around’ $46bn).
The shares were down 1.2% in early trading.
Our view
HSBC delivered a decent second quarter, but much of the strength had already been telegraphed heading into results. Revenue came in ahead across net interest and fee income, and credit losses were slightly better than expected. The small guidance upgrade takes banking net interest income only to where consensus was already sitting, limiting the scope for material forecast upgrades. The cost outlook is less helpful, with stronger performance potentially bringing higher variable pay this year and further investment to support growth in 2027.
The Hang Seng integration remains a key call on capital and execution. HSBC increased its expected simplification savings to around $2bn, but some of that extra capacity could be reinvested if momentum remains strong. That is sensible in the long term, though it means that strong revenue performance may not translate cleanly into profit in the near term.
Efforts to refocus the business on higher-growth areas continue. HSBC has already made several disposals and is looking at other ways to streamline. The strategy should leave a simpler group, with resources directed towards the areas where HSBC has the strongest competitive positions and clearest opportunities to grow.
Traditional banking remains the main income driver, and the improvement in loan demand was encouraging. Group lending accelerated, with a welcome return to growth in Hong Kong alongside continued strength in the UK. Combined with healthy deposit growth, that supports the income outlook and suggests that HSBC is finding more ways to grow beyond relying on interest rates alone.
There is a trade-off. Stronger lending uses capital, with rising risk-weighted assets already slowing the rebuild in the CET1 ratio. The new $1bn buyback marks a welcome resumption after the Hang Seng deal, but it was smaller than some expected. If loan growth stays strong, expectations for buybacks are likely to come down as HSBC balances shareholder returns with funding profitable growth.
Fee income offers another route to growth, particularly across trading, transaction banking and wealth management. Interest rates and consumer confidence still affect these businesses but does so less directly than traditional banking. The Asian focus is especially attractive in wealth, where HSBC has scale, strong inflows and established leadership positions.
Capital remains within the target range, and credit quality looks manageable. Non-performing loans still need watching, particularly given HSBC’s exposure to Asian commercial property, but there was little evidence of broad-based deterioration this quarter.
The global footprint remains a differentiator, and HSBC is our preferred UK-listed name for Asian exposure. That said, UK-focused banks have a clearer medium-term growth path and fewer competing demands on capital.
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 because of 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 group's 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 that yields are variable and not a reliable indicator of future income. Keep in mind that 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.