HSBC Holdings Q1 2026 Earnings Call - Wealth Flows Surge Amid Strategic Simplification and Geopolitical Stress Testing

Webinar Moderator, HSBC: Welcome to the analyst and investor presentation for HSBC Holdings plc first quarter 2026 earnings. This webinar is being recorded. I will now hand over to Pam Kaur, Group Chief Financial Officer.

Aman Rakkar, Analyst, Barclays0: Welcome, everyone. Thank you for joining. We have had another quarter of positive performance, which reflects further progress towards creating a simple, more agile growing HSBC. Annualized return on tangible equity, excluding notable items, was 18.7%. We are confident in achieving the targets we set out to you at the full year. We are updating 2 pieces of guidance today. Banking NII to around $46 billion and our expected ECL charge to around 45 basis points. I’ll talk to the drivers of both shortly. In the quarter, we continued to make disciplined progress in simplifying the group to unlock HSBC’s growth potential. We actioned a further $0.2 billion of simplification saves and remain well on course to deliver the $1.5 billion target.

We completed the privatization of Hang Seng Bank, the sale of UK Life Insurance, Sri Lanka Retail Banking and South Africa. As you will have seen, we have agreed the sale of our retail banking business in Indonesia. We expect to realize an up to $0.4 billion gain on completion, anticipated in the first half of 2027. Our CIB business in Indonesia is unaffected. On outlook, the economic landscape remains complex and uncertainty will persist. Our thoughts are with all those affected by current events in the Middle East. We are fully engaged in supporting our colleagues, customers, and partners across the region. We are well-positioned to work with our customers and manage the uncertainties in the global environment from a position of financial strength. Let’s turn first to the income statement, where I will focus on year-on-year comparisons, unless I indicate otherwise.

Profit before tax, excluding notable items, was $10.1 billion. Notable items this quarter include a loss of $0.3 billion on moving Malta to held for sale, a loss of $0.2 billion on the sale of UK Life Insurance, and $0.1 billion of restructuring costs related to our simplification program. Revenue, excluding notable items, grew 4% year-on-year to $19.1 billion. This was driven by banking NII and strong growth in wealth fee and other income. Annualized RoTE was 18.7%, 0.3% higher than last year. It benefited from the removal of Hang Seng Bank minorities. Looking at capital and distributions, our CET1 capital ratio is 14%, down 90 basis points on the quarter as expected following the privatization of Hang Seng Bank.

Reflecting our strong organic capital generation, we are already back to our operating range of 14%-14.5%. The dividend for the quarter is $0.10. We continue to target a dividend payout ratio for 2026 of 50% of earnings per ordinary share, excluding material notable items and related impacts. Let’s now turn to our business segment performance. Each of our four businesses grew revenues, and each also delivered annualized RoTE in excess of 17%, excluding notable items. This broad-based performance shows our strategy is working. I would just mention the $0.2 billion gain from a one-off property asset disposal in the corporate center, which is not a notable item. Moving now to banking NII. Banking NII increased $0.3 billion year-on-year to $11.3 billion.

It fell by $0.5 billion quarter-on-quarter. $0.3 billion of this quarterly decline is day count. We also noted at the fourth quarter $0.1 billion in gains that we did not expect to repeat. In addition, this quarter, HIBOR was lower in March, and we also recognized a $0.1 billion adverse one-off. We are now upgrading our full year banking NII guidance to around $46 billion. This reflects an improved interest rate outlook. I would highlight that interest rate curves have been volatile and can, of course, change further in either direction. Turning now to wholesale transaction banking. Recent economic, market, and tariff situations have validated the strength of our franchise, both over the last 12 months and in this quarter. We grew fee and other income 2% year-on-year.

Customers continue to turn to us to help them navigate volatility and uncertainty. Our balance sheet and franchise strength are particularly valuable in times like this. In the quarter, securities services grew fee and other income 11%, reflecting new mandates and higher transaction volumes. Trade grew 8%, driven by continued growth in volumes. Payments grew 3%, driven by growth in volumes across most regions. Foreign exchange fell by 1% compared to a strong first quarter last year. We continue to see growth in volumes and strong client engagement. Turning now to wealth. We grew fee and other income by 15% to $2.7 billion. I remind you that the first quarter of last year was a high base. Growth was driven by all four income lines, and we added 287,000 new to bank customers in Hong Kong.

It is worth remembering there is typically favorable seasonality to the first quarter when compared with the fourth quarter. Having said that, we are pleased that the investments we are making in our wealth products, distribution channels, and customer experience are translating into real results. Private banking grew 8% and asset management 3%. Investment distribution performed very well, up 21%, reflecting particularly strength in our customer franchise in Hong Kong. Insurance growth of 19% from a strong base was also pleasing. Again, with Hong Kong the standout. Our insurance CSM balance was $15.2 billion, up 19% versus the prior year. First quarter wealth balances were $1.6 trillion, up 12% or $170 billion year-on-year.

Net new money in the first quarter was a strong $39 billion, of which $34 billion came from Asia. This is a broad-based and robust franchise. Our investments and focus are paying off. I will note that we saw a slowdown in flows in the early days of the conflict, but activity recovered in April across our wealth franchise in Asia. Turning now to credit. Our first quarter ECL charge was $1.3 billion, equivalent to an annualized charge of 52 basis points as a percentage of loans and advances. Given the ongoing uncertainty in the outlook, we are updating our full year 2026 credit guidance to around 45 basis points. This quarter includes a $0.3 billion charge related to the Middle East conflict.

This is precautionary and related to the impact of the conflict everywhere, not just in the Middle East. We also include $0.4 billion for fraud related secondary securitization exposure with a financial sponsor in the U.K. I will emphasize that we regard the stage 3 charge this quarter as idiosyncratic and not representative of the risks in the wider portfolio. We have completed a full review of the highest risk areas in our portfolio and have not identified any comparable fraud concerns. We have updated our risk appetite and are incorporating lessons in our due diligence processes. This remains an area in which we are comfortable, but it is not a significant growth driver in our plan. In Hong Kong commercial real estate, we had some small recoveries in the quarter and overall it remains broadly stable. You will see our usual detailed breakdown on slide 21.

On slides 15 and 16, we have also set out our private market exposure. We have made these expansive definitions to give you a full picture of our full service business in private markets. Let’s now turn to costs. We continue to take a disciplined approach to cost management. We are on track to achieve our target of 1% cost growth in 2026 compared to 2025 on a target basis. Cost growth this quarter is 3% year-on-year. This included 1% driven by higher variable pay accrual based on business performance. If you exclude the variable pay accrual, target basis cost growth was around 2% year-on-year. We manage costs on a full year basis, so looking at a quarter in isolation is not meaningful. We remind you that our simplification actions provide a cumulative year-on-year benefit through 2026.

For the avoidance of doubt, our 2025 target cost baseline is $34 billion when updated for FX. Let’s turn to customer deposits and loans. Our deposits momentum continues with $99 billion of deposit growth, including held for sale balances over the last 12 months. CIB deposits increased $10 billion quarter-on-quarter in what is usually a soft quarter. Hong Kong was a particular driver. This corporate inflow offset a slower retail flow in our Hong Kong pillar. You will see deposit seasonality on slide 20. Excluding the movement of Malta to held for sale, IWPB deposit growth was $4 billion. You will see on slides 18 and 19 that we have set out additional deposit disclosure. This shows you the deposit base split between fixed term and instant access accounts.

The 70% instant access proportion should help you see the strength and breadth of our deposit base across our businesses. Turning to loans, growth picked up in the quarter. CIB mainly reflects continued momentum in GTS, higher term lending in Hong Kong, and drawdowns on committed lines by high quality borrowers in the Middle East. We are pleased to be there for our customers when they need us most. Hong Kong returned to volume growth this quarter after a period of decline. We are pleased to see borrowing appetite return as the economy grows and as residential property prices recover. Our $13.7 billion investment in Hang Seng Bank is a signal of our confidence in the opportunity in Hong Kong. We are investing across both iconic banks and we see significant growth runway for both ahead. In the U.K., we delivered another quarter of good growth.

This was both mortgages and our commercial lending book. We see good momentum in our domestic portfolio. Low levels of household and corporate debt in the U.K. provide a platform for the continued growth of our franchise. Now turning to capital. Our CET1 capital ratio was 14%, down 90 basis points in the quarter. This follows the 110 basis point impact of the Hang Seng Bank privatization and Malta disposal loss. We also saw a 12 basis points impact from the fair value through other comprehensive income bond portfolio as government yields rose following events in the Middle East. These were offset by ongoing strong organic capital generation. We are pleased to have remained within our CET1 operating range since the announcement of the Hang Seng Bank privatization. A decision on future share buybacks will be taken quarterly subject to our normal buyback considerations.

Let’s turn to targets and guidance. First, targets. We reiterate the targets we set out to you at the full year. Revenue rising to 5% year-over-year growth by 2028, excluding notable items. Return on tangible equity of 17% or better, excluding notable items each year. Dividends, 50% of earnings per share, excluding material notable items and related impacts. Finally, to guidance. Today, we are updating our banking NII to around $46 billion given the higher rate outlook and our ECL charge to 45 basis points given macroeconomic and market uncertainty. In addition to informed management planning, we have assessed a range of top-down stress scenarios. We have set these out for you on slide 17. I’m happy to discuss these further in Q&A. All other guidance set out on this slide remains unchanged.

To conclude, the intent with which we are executing our strategy is reflected in the growth and momentum in our first quarter. It shows discipline, performance, and delivery. Discipline in the way we are applying strong cost control and investing to deliver focused, sustainable growth. We are on track to achieve our target of around 1% cost growth in 2026 compared to 2025 on a target basis. We are reallocating costs from non-strategic or low returning businesses towards growth opportunities while upgrading our operating model. This includes investing in artificial intelligence to empower our colleagues, simplify how we operate, and enhance the customer experience by personalizing service at scale. Performance in our earnings. Each of our four businesses grew revenues, and each also delivered annualized RoTE in excess of 17%, excluding notable items. Delivery.

Our first quarter results show we are creating a simple, more agile, growing HSBC built on the strong foundations of a robust balance sheet and hallmark financial strength. This is why during periods of greater uncertainties, our customers turn to us as a source of financial strength, and we remain confident in delivering against our targets. With that, I’m happy to take your questions.

Webinar Moderator, HSBC: Thank you, Pam. If you would like to ask a question today, please use the Raise Hand function in Zoom. When you are invited to ask your question, please accept the prompt to unmute your line. If you find your question has been answered, you may remove yourself from the queue by lowering your hand. Our first question today comes from Guy Stebbings at BNP Paribas. Please accept the prompt to unmute your line.

Guy Stebbings, Analyst, BNP Paribas: Hi, good morning and afternoon, everyone. Thanks for taking questions. The first one was on wealth. Clearly, another very good performance, particularly on investment distribution insurance. Can you talk about what you’re seeing in terms of flows in the competitive landscape in Hong Kong right now? Sort of mindful it’s been a, been a very good story, and the benchmark for comparisons is getting tougher in terms of growth rates, but equally, there’s sort of no evidence of letup in momentum. Can see another really good performance for new business CSM, which is, you know, well, well above, what you’re actually booking through the P&L right now. Then the second question was on private markets. Thanks for slide 15 and 16.

Interested in any changes you’re making in your approach to this segment. You’ve called out the $400 million hit in Q1, and you’ve not identified anything comparable in the book. One of your peers has signaled sort of partially step away from some exposure in this segment as they’ve assessed sort of levels of financial controls. I know you said this wasn’t a big growth driver of the plan, but are you changing how you’re thinking about this segment in any way? Thank you.

Aman Rakkar, Analyst, Barclays0: Thank you, guys. If I take your questions in turn, on the first question on wealth, we are really pleased with the growing CSM balance, and as well as on investment distribution. First quarter is always a very strong quarter for us. I’m pleased to say that even after some slowdown in the month of March, we again see momentum coming through in April. We have a very vast range of products that we offer to our customers, so we’ve seen some shift in the products, so people moving from bonds and mutual funds into structured products and equities, and all that obviously contributes very well to our fee income in wealth.

We have an iconic brand in Hong Kong. Yes, competition is fierce, as you can see, we are also growing new customers despite putting the fee in January. These new customers over time also become customers from a wealth perspective, but more in the near term for the insurance business. Those are all very positive signs for us. From a private credit perspective, our overall exposure on private credit has stayed the same as I called out at the year-end of $6 billion on the chart. This is both drawn and undrawn. The private credit and related exposure stays within 2% of our balance sheet. That, again, from our perspective, is a comfortable position in terms of the concentration.

Following the, what I would call experience that we’ve seen in the fraud perspective, I’ve always said that in this ecosystem, no one is immune to second order, you know, sort of, exposures, which is where we have risk hedged from financial sponsors. Clearly, as a learning, what we are working on is looking at very specifically some of the additional due diligence processes we may carry, even where we are relying on the due diligence of financial sponsors. In terms of concentrations, we are also looking at any specific concentrations on individual counterparties in this space, but remain comfortable overall. As I’ve said, we will not have this, and it’s never been a significant driver of private credit.

Same as before, continue to be even more diligent where we are relying on financial sponsors related secondary exposures and their due diligence.

Webinar Moderator, HSBC: Thank you, Pam. Our next question today comes from Amit Goel at Mediobanca. Please accept the prompt to unmute your line.

Amit Goel, Analyst, Mediobanca: Hi. Thank you. Yeah, two other questions for me. One was just on the cost growth. Seemed like the cost growth was a bit higher this quarter, even ex the VP, than, you know, the overall target for the year. Just in terms of why you think the costs will be a bit more contained, or at least the cost growth will be a bit more contained, and the drivers there. The second question is just on the Middle East scenario. Appreciate this, the extra slide. Just curious on those stress scenarios.

What would we need to see or what would we have to see to be seeing some of that scenario play through and to have further impact on your ECL guidance? Thank you.

Aman Rakkar, Analyst, Barclays0: Thank you, Amit. I’ll take the cost question first. As we have said, our simplification actions will be completed by the middle of the year, and those simplification actions will give us cumulatively more savings in the second half of the year. If we factor those in and phase out in line with the forecast and financial resource planning, we are very comfortable that we will be within our cost guidance of around 1% growth on a target basis. It is a timing of when you have the gross costs increase, which we said last year would be 3%, and then the timing of when the 2% savings come so that you come to the net 1% cost growth.

From a Middle East scenario, firstly, to be clear that our ECL guidance, and indeed when we reaffirm our targets, we look at all plausible downside scenarios, and we are by nature quite conservative in how we approach these matters. We have, in the fullness of an integrated top-down stress scenario, called out a bookend stress scenario, which requires all 5 things to happen. To give you some perspective, in this kind of a scenario, you would expect stock markets to be down 35%, it’s pretty severe. You would also expect oil price at 145 basis points and market disruption, as well as significant GDP slowdown across markets globally. That is the context of this scenario.

As I said earlier, in terms of the right weightage of probability from an ECL perspective, that has already been factored in in the 45 basis points guidance. This scenario gets driven by not just an ECL number, but also an impact on the revenue line. It assumes that the wealth business, which has continued to do really well, even through the month of April, will have a significant impact in this kind of a scenario, as well as deposits, which typically in a stressed position, always we become an inflow for large deposits, but because of the extreme market disruption, very high inflation, that the deposits will come down because customers will need to that money in order to survive through a very stressful economic scenario.

Webinar Moderator, HSBC: The next question today comes from Aman Rakkar at Barclays. Please accept the prompt to unmute your line.

Aman Rakkar, Analyst, Barclays: Good morning, Pam. Thank you very much for the chance to ask questions. I just wanted to ask one quick follow-up on the Middle East scenario. Is there any chance, I think just back of the envelope, it’s a kind of $2 billion-$3 billion hit to PBT in terms of the mid-tier single-digit percentage on 2026. Is there any chance you could just kind of round out the disclosure on that in terms of what the breakdown in that scenario is between revenues and impairments? I’m assuming it’s literally revenues and ECLs. If you could just quantify that for us, that would be really helpful. The second question was just on banking NII, please. First of all, I think you’re calling out a $100 million negative impact in the quarter.

Just kind of adding that back in, I guess, to the underlying run rate, it looks like your Q1 banking NII is annualizing a shade above the $46 billion that you are guiding for your full year. I’m interested in the sequential drivers of net interest income please from here as you see them. Presumably rates not that much of a headwind, and you’ve got some balance sheet momentum. Trying to work out what the negative is from here to offset that, please. Thank you so much.

Aman Rakkar, Analyst, Barclays0: Thank you, Aman, for your two questions. Taking the first one, firstly to say, yes, the impact absolutely is equal between sort of revenues and ECLs broadly in this scenario, and your numbers were right. I also want to say this is what I would call an unmitigated impact. In other words, it’s prior to management actions. We are very comfortable that even in stress scenarios, we have a range of management actions we would be taking, and therefore we are very confident in reiterating our RoTE targets for 2026, 2027 and 2028. On banking NII guidance, as always, as you would expect, we tend to be quite conservative. We consider in the guidance all possible downside scenarios as well, at least the plausible ones.

In terms of the mathematical calculation as you’ve done, X the one-off and looking at the day count, et cetera, it of course takes you above the GBP 46 billion. Our guidance is around GBP 46, not just GBP 46, that’s the first point to call out. The things that we have considered in terms of a possible plausible headwind would be, of course, there’s an uncertainty on the interest rates. Also, we have seen the experience, there were a few weeks of impact of a lower HIBOR in the month of March, but I’m very pleased to note that the HIBOR has again come to the range that we are most pleased with, which is around 2.5%. Obviously there is the continuing tailwind of our structural hedge reinvestment.

We’ve given you disclosures on that, and the deposit flow overall continues to be very strong. We are happy to say around 46 with our usual conservatism.

Webinar Moderator, HSBC: Our next question today comes from Andrew Coombs at Citi.

Andrew Coombs, Analyst, Citi: Hi there. A couple of follow-ups from me, please. Just firstly coming back on the private credit exposures on slide 16. I think the exposure in which you booked the charge today falls within the GBP 3 billion securitization financing bucket that you list on that slide. Can you just give us an idea, please, of how much of the exposure that you’ve taken a charge on today accounts for of that GBP 3 billion total, please? Secondly, coming back to wealth, you know, it’s difficult to quibble on 15% year-on-year growth, but that revenue growth does look slightly weaker than your peers. Can you just give us an idea of where you think the differences are? Is it business mix? Which means do you have lower transaction income benefit year-on-year?

Anything you can comment on relative performance. Thank you.

Aman Rakkar, Analyst, Barclays0: Thank you. Just in terms of the exposure, we have substantially provided for that exposure, and that exposure then you can see mathematically is not an insignificant part of the $3 billion. That you’ve called it quite rightly, it really comes from that particular bucket. Coming back to your point on our revenue. In terms of the revenue, I’ll just bring to attention that the CSM balances have been growing, but the way they actually hit the P&L, it is really over a period of time, and therefore what you capture in the P&L is one-tenth, and that then flows through over the following years. That is how I would look at it in terms of the fee income growth.

If you exclude that or adjust for that, we are very much in line or indeed ahead of peers in certain pockets.

Webinar Moderator, HSBC: Thank you, Pam. The next question today comes from Catherine Lim at J.P. Morgan. Please accept the prompt to unmute your line.

Catherine Lim, Analyst, J.P. Morgan: Hi, Pam. I would like to ask about the fraud cases. Like, can we have more color about the fraud cases such as like what is our total exposure? Because the key concern is that is this $0.4 billion one-off, or we were going to see more like a step up in impairment charges because of this particular case? I think, this is the number 1 questions. Number 2 questions is like, I look at the, you know, I look at the risk weight and right? It seems like a downside scenario, now we aside 45%, versus like before the war, like say for Q 25 is roughly about 15%. Can we get more color of like, say, in these scenarios? Let’s put it this way.

Under what situations do you think we will continue to see, continue rise in this 45% of downside scenarios? Thank you.

Aman Rakkar, Analyst, Barclays0: Thank you, Catherine. Firstly, this fraud is an idiosyncratic fraud. We have gone back and reviewed all our highest risk exposures across our portfolio and specifically looked at the private credit exposures as called out on the slide, and we see no comparable fraud risks in this matter. Of course, we continue to review our risk appetite, tightened due diligence and so on. Therefore, we feel quite comfortable that this is a one-off fraud indeed, and it comes to us through a secondary exposure that we have through a financial sponsor and where there was reliance on the financial sponsor’s due diligence. That’s the 1st case. 2nd one, in terms of the downside scenarios, the 45% downside scenario is built also from a 30% Middle East related specific scenario that we created, which was a 5th scenario.

We do not expect that 45%, you know, downside scenario to shift much. I can just give you as a comparison as we went through periods of COVID, Russia, Ukraine, that sort of leaning on the downside scenario is pretty much at the top end of the downside scenarios. Once the situation gets more normalized, we bring the scenarios back to what are our normalized scenarios that you have called out. I also want to stress to you that the IFRS 9 downside scenarios factor in what we think at this point of time, the full extent of the forward-looking guidance as we would obviously calculate based upon what we’re seeing on the ground, as well as assumptions, as well as the probabilities given to all the scenarios.

This is quite distinct and different from the bookend Middle East conflict stress scenario on slide 18, which has a much holistic view and a range of things happening, including, as I called out, from very severe stock market disruptions as well as oil price distinctions. Just want to make a clear distinction between what you account for, what you have in your outlook, versus what you keep as part of a planning exercise in terms of the range of scenarios that you should always be aware of as a good management practice.

Webinar Moderator, HSBC: Thank you, Pam. Our next question today comes from Chris Hallam at Goldman Sachs.

Chris Hallam, Analyst, Goldman Sachs: Hey, good morning, everybody. 2 from me. The first, again on wealth. $5 billion of that $39 billion of net new money was deposits, so it feels as though sort of 90% of the flows were invested, whereas if I think about the stock of your wealth balances, it’s closer to 60%. How should we think about that? You know, is that a structural trend you’re seeing? Are clients becoming more invested? If so, what does that mean for fee margins and for returns going forward? Maybe just within the $39 billion, without the conflict in Iran, would that number have been higher or lower? Second, on capital, like you said, well managed through the guidance range, throughout the HSB privatization process.

Obviously this quarter, a couple of one-offs within the quarter, but the underlying business performance appears to be encouraging. You know, given all of that, can you comment on when you expect to restart share buybacks? Thank you.

Aman Rakkar, Analyst, Barclays0: Thank you, Chris. Firstly, in terms of invested assets, we are very pleased with the growth in invested assets, but I just want to remind you, typically, Q1 is strong for investment, so there is some seasonality of money moving from deposits into investment assets in Q1. We’ve also been very strong in terms of the new mandates we’ve got from private banking. Overall wealth is a very robust story to call out, and it’s very broad based, not just dependent on one lever. In terms of the conflict, there was a bit of, you know, risk off wait and watch in the second half of March. However, as April has come through, we continue to see high volume of transactional activity.

As I said earlier, you know, our customers, they continue to readjust their portfolios. Our strength lies in the broad range of products we have on offer. We have really invested in this business, so going forward from a fee income perspective, I do believe there is a huge tailwind for us in terms of how we build on this, you know, year on year. Coming back to capital now. Firstly, I’m really pleased that even with this very large, you know, core investment we have done in Hong Kong, which is a critical market for us where we are hugely confident about the future growth prospects, we have still remained throughout the entire period within our CET1 operating range, and that truly reflects the very strong capital generation capabilities of our business across all four businesses.

That is indeed very encouraging. Now in terms of share buybacks, you’re right that even with all the one-offs we’ve had in the first quarter, we are in a good position, and I expect Q2 to be equally highly capital generative for us. Of course, a share buyback decision is done on a quarterly basis. Starting point is always capital generation, which looks strong. We have to also look at loan growth, then we have to look at our 50% dividend payout ratio, which is an important target for us, and the residual is always in terms of share buybacks and distributions, you know, notwithstanding any inorganic opportunities for which we have an extremely high hurdle rate. We will look at it again, starting from Q2.

Webinar Moderator, HSBC: The next question today comes from Kunpeng Ma at China Securities.

Kunpeng Ma, Analyst, China Securities: Thank you. Morning, Pam. I got two questions for you. This first one is about Hang Seng. I’m glad to hear the momentum in deposit and wealth management in the first quarter and the pickup in the momentum from April. What proportion of such momentum could be attributed to the synergies out of the Hang Seng deal? Also some color on future synergies, the future, you know, synergy effects of the Hang Seng deal would be much helpful for us. Yeah. The second question is on HSBC’s global footprint. Yeah, this is out of the proposed disposal of the Indonesian retail business. You know, I think the Indonesian market is quite important. It’s not not the kind of some marginal or less important market.

I wanna know the HSBC’s views on your global franchise. I mean, which markets are important, you know, to you, or which markets and which business are less important? Yeah. Thank you.

Aman Rakkar, Analyst, Barclays0: Thank you, Kunpeng. Firstly, we have made a very good start on the Hang Seng privatization, but the synergies at the moment have been very little, if any, because it’s just the start of the process. We have already started investing in Hong Kong, both in the HSBC Red brand and the HSBC Green Finance brand in terms of technology, in terms of simplifying customer journeys and training and skilling of our colleagues. We do expect progressively the growth from the synergies to come through starting from the second half of this year, but mainly through 2027, 2028. That’s a very strong tailwind again to support our targets as we progress.

So far everything is very much on plan and with a lot of engagement with colleagues on the ground, which is, I think, really important both in terms of maintaining the momentum, the sentiment, as well as reinforcing our strong optimism in Hong Kong as you’ve already seen in the results, as well as in the stabilization of the Hong Kong commercial real estate market. Now, coming to our global footprint from an Indonesia perspective, we think Indonesia is a critical market for us from a CIB perspective. It is an important network market, and the economy is significant from an Asian perspective. However, our retail business of the size and the scale it was and the scope it had was not within the strategy of our wealth business. It was a valuable business.

Remains a valuable business, as you’ve seen from the financials for the transaction that has been announced. From our perspective, from a wealth perspective, it did not meet the high hurdle rate criteria we had. We have other markets where we are investing in a far more focused manner.

Webinar Moderator, HSBC: Thank you, Pam. Our next question today will come from Alasdair Ward at Autonomous.

Alasdair Ward, Analyst, Autonomous: Good morning, Pam. Thank you for taking our questions.

Aman Rakkar, Analyst, Barclays0: Sure.

Alasdair Ward, Analyst, Autonomous: Just a couple of follow-ups on the credit costs and on the insurance that we touched on just a moment ago. If you’ve got 52 basis points booked in for the first quarter on credit costs, it looks like therefore to get to your 45 over the rest of the year, you’d be looking at a little bit above 40 for the remaining quarters of the year. You were at 40 for the full year before. Is that just implicitly building in maybe a little bit more drag from the Middle East, or is there anything else going on anywhere else for us to be thinking about?

Just a second point, you touched on the CSM there and how it can make a difference to how you’re booking your speed of growth of income at the wealth line. HSBC has been really strong on some big ticket, quite short payment period, products that some of your big name peers in Hong Kong are not necessarily so keen on. Can I just confirm you talked about a 10th there, that your release rate in years is about 10 years, and that this, shorter payment period thing doesn’t turn up in a, in a shorter release rate as well? Thank you.

Aman Rakkar, Analyst, Barclays0: Thank you, Alasdair. Firstly, on the credit costs. You’re right, this quarter’s credit cost of 52 basis points has two significant numbers in it. One is obviously the idiosyncratic one of fraud related. If you take that off, we are pretty much in line with where we would be in Q1 2025. Our books overall, ex these two items, have performed really well. The second being obviously the Middle East reserve. If you take the Middle East reserve build of 300 and the fraud number, then the actual credit cost would be lower than what it was in Q1 2025 at around $600 million. What we are looking as $600 million, sorry.

As we look at going forward into the next few quarters, we are always a bit conservative, and we do have a little bit of scope built in, both in terms of what happens on stage 3s if the fraud related item, obviously that’s a one-off. The ex fraud related stage 3 build up increases because of a prolonged conflict in the Middle East. Q1 has been very benign on Hong Kong commercial real estate. We are very pleased that we are seeing the beginning of a stabilization, we are not calling it the end of the cycle, therefore we keep that sort of a buffer for the rest of the year. In terms of the CSM balances, very specifically, there is no change in the accounting policy.

Obviously, it’s based upon IFRS 17 principles, hence the drip-feed over the 9-10 year period that we will see. The key thing there is, as long as with the new customers that we are onboarding, with the growth in the CSM balance, the growth in the CSM balance exceeds the P&L flow from the CSM balance because the trajectory is very positive in the growth of that business in Hong Kong. It is an iconic brand for us, so therefore the demand for that product from a distribution perspective remains extremely strong.

Webinar Moderator, HSBC: Thank you, Pam. We will take our last question today from Joseph Dickerson at Jefferies. Please accept the prompt to unmute your line.

Joseph Dickerson, Analyst, Jefferies: Hi, Pam. Thank you for taking my question. I just wanted to ask, in terms of the numbers you’ve given, the guidance upgrade on the banking NII, is that taking into account the effectively marking the market for the current yield curve in the U.K.? I note some footnotes around you were using rates as, I think, mid-April. Does that take account of the yield curve in the U.K.? Presumably there’s some outer year tailwind into that. Given you’ve got some outer year revenue growth assumptions, I’d be keen to know how that, how any maturities at higher rates might influence the outer year revenue growth rate. Many thanks.

Aman Rakkar, Analyst, Barclays0: Thank you, Joe. From a banking NII perspective, yes, we looked at the yield curves as at the middle of April across the currencies. That’s correct. In terms of the revenue growth projections that we gave for the outer years, they were based upon the yield curves as when we set our targets. If the yield curves continue to be higher or grow, then everything else being equal, that will be a tailwind for revenue in future years. The banking NII guidance, as you know, we always only give for the current year.

Webinar Moderator, HSBC: Thank you very much. That ends today’s Q&A. I’ll now hand back to you, Pam, for any closing remarks.

Aman Rakkar, Analyst, Barclays0: Thank you all for your questions. As you’ve seen from our results, we are very pleased with our return on tangible equity of 18.7%. We have never printed a number of this size for nearly 20 years now. That gives us a very good start in terms of where our targets are and how firmly we stand behind them for the next 3 years. Of course, there are macro uncertainties in the current environment, and we have given disclosures which are very fulsome, both on private credit as well on extreme downside stress scenarios bookends. Hopefully in that context, I’ve answered all your questions. Obviously, if you have any more detailed questions, please reach out to the Investor Relations team. Thank you very much again for your patience and interaction.

Webinar Moderator, HSBC: Thank you everyone for joining today. You may now disconnect.