HSBC first-quarter pre-tax profit misses estimates on higher expected credit losses

Europe’s largest lender, HSBC, released its first-quarter financial results on Tuesday, reporting a pre-tax profit of $9.4 billion. While this figure fell slightly below analysts’ estimates, the bank saw a 6% increase in revenue compared to the previous year, driven by stronger wealth fees and other income.

In comparison to consensus estimates compiled by the bank, HSBC’s first-quarter results were as follows:

– Pre-tax profit: $9.37 billion vs. $9.59 billion
– Revenue: $18.62 billion vs. $18.49 billion

The slight dip in pre-tax profit was attributed to higher expected credit losses and impairment charges. Expected credit losses of $1.3 billion were $400 million higher than the previous year, with exposure to a UK financial sponsor and provisions related to increased uncertainty and economic challenges stemming from the conflict in the Middle East.

Despite these challenges, HSBC remains committed to cost reduction initiatives, aiming to achieve $1.5 billion in annualised cost savings by June 2026. The recent privatization of Hang Seng Bank, a subsidiary of HSBC, is expected to result in pre-tax revenue and cost synergies of $0.5 billion across both brands in Hong Kong by the end of 2028.

The bank highlighted potential risks associated with the Middle East conflict, including higher oil prices, inflation, and a slowdown in GDP growth. In the event of these factors materializing, HSBC cautioned that there could be a negative impact on its profit before tax in the mid-to-high single-digit percentage range.

Maintaining its targeted return on tangible equity (RoTE) of 17%, HSBC warned that the adverse effects of the Middle East crisis could potentially push RoTE below this threshold in 2026. The reported quarter saw an annualized RoTE of 17.3%.

In a positive move, the HSBC board approved an interim dividend of 10 cents per share for 2026. This decision reflects the bank’s commitment to returning value to its shareholders amidst a challenging economic environment.

Overall, HSBC’s first-quarter results demonstrate a resilient performance in the face of external challenges, with a focus on cost efficiency and strategic growth opportunities. As the bank navigates through uncertain times, maintaining a strong financial position and delivering value to stakeholders remain key priorities.