HSBC, Europe's largest bank, announced first-quarter results for 2026 that came in lower than estimates, as increased credit loss provisions weighed on profitability. Pre-tax profits stood at $9.4 billion, compared to $9.5 billion in the same period last year, while analysts had expected a stronger performance. Conversely, revenue increased by 6% year-on-year, reaching $18.62 billion and exceeding forecasts, primarily due to stronger income from wealth management services.
Rise in provisions for bad loans
A decisive factor for the deviation from estimates was the expected credit losses, which amounted to $1.3 billion—an increase of $400 million compared to last year. The bank attributed this increase to exposure to a financial entity in the United Kingdom, as well as the deterioration of the macroeconomic outlook due to the crisis in the Middle East. Chief Financial Officer Pam Kaur stated that the bank considers its provisions adequate, even in worsening scenarios.
Share price drop in Hong Kong
HSBC's stock price retreated by 4.6%, reflecting investor disappointment over earnings. The bank reiterated that it remains on track to achieve an annual cost reduction of $1.5 billion by mid-2026. At the same time, through the privatization of Hang Seng Bank, it estimates that it will achieve revenue and cost synergies totaling $0.5 billion by 2028.
The process was completed in January with the bank's delisting from the Hong Kong Stock Exchange. Net interest income rose by 8% to $8.9 billion; however, operating expenses also increased by 8% due to inflation, currency impacts, and increased spending.
Warning over the Middle East
HSBC warned that the conflict in the Middle East could significantly affect its profitability. If oil prices rise further and global growth slows down, the impact on pre-tax profits could reach a mid-to-high single-digit percentage.
Performance and dividend
The return on tangible equity (RoTE) stood at 18.7%, above the 17% target, although the bank warned that it could fall below this level in 2026 should conditions deteriorate. Meanwhile, the board of directors approved an interim dividend of 10 cents per share for 2026.
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