HSBC reported a 7% rise in underlying first-quarter revenue to $17.7bn, when ignoring currency and one-off items. Growth was driven by fee income, with a small dip in banking net interest income.
Underlying profit before tax rose 11% to $9.8bn, 15% better than expected driven by fee generating businesses. Impairments rose $0.2bn to $0.9bn, driven by a weakening economic outlook.
The CET1 ratio, a key measure of financial resilience, was 14.7% (14.0-14.5% target range). A new buyback of up to $3bn was announced, alongside a quarterly dividend of $0.10 per share.
Full-year and medium-term guidance was unchanged, including a target of $42bn in banking net interest income over 2025. But management called out “heightened uncertainty” from trade policies, expecting demand for loans to be soft over the year.
The shares rose 2.2% in early trading.
Our view
HSBC’s core businesses are holding up well, which is a strong position amid global economic uncertainty. With its global footprint, the bank is exposed to risks from trade tensions or a potential slowdown. In a worst-case scenario, management’s numbers suggest a 10% hit to profits, not accounting for things like rate cuts.
The good news? That’s not their expectation. Keeping full-year guidance unchanged, after a strong quarter, shows both awareness of challenges ahead and confidence in the bank’s resilience.
Efforts to refocus the business on higher growth areas continue. Last year HSBC made several changes including the sales of its retail banking operations in France, and a complete exit from Canada and Argentina. Latest plans are looking at reducing costs by around $3bn 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. As the interest rate environment softens, interest income will come under pressure and needs to be supported by loan growth. But that’s unlikely to happen over 2025 with tariff wars impacting confidence from borrowers.
Fee income is also key, from areas like trading and wealth management. Interest rates and consumer confidence still impact some income streams, but not to the extent of more traditional banking operations. With the headwinds facing the more traditional banking operations, this diversification is a positive.
The balance sheet is strong and supports ongoing capital distributions, though nothing is guaranteed. We are keeping an eye on non-performing loans; HSBC has typically been seen as a leader among its Asian peers but a tick higher in recent years has eroded that position. We aren’t concerned, but it’s something to monitor.
The Asian focus is a positive when it comes to areas like wealth management, with this being a high growth part of the market. HSBC has leadership positions, so looks well placed to benefit. That said, a key issue has been pressure from investors to split the Asian elements from the rest of the group. Good performance of late has helped keep those pressures at bay – but it’s an area to watch,
The Asian focus is a differentiator from many of its peers, and we continue to see the potential for further growth. Though not guaranteed, there’s also scope for ongoing shareholder returns with the balance sheet in a strong place. HSBC is our preferred UK-listed name for Asian exposure, though recent strengths have already been reflected in a step up in the valuation.
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. Its 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.
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