HSBC Holdings reported a marginal fall in first-quarter pre-tax profit as elevated credit charges and higher costs counterbalanced gains in revenue sourced from its wealth operations and interest income.
For the three months ended March 31, the group posted profit before tax of $9.4 billion, described by the bank as down 1% billion from a year earlier. Management attributed the decline to a rise in expected credit losses, higher operating expenses and adverse one-off items.
Revenue for the quarter increased 6% to $18.6 billion. The bank said that performance was supported by robust wealth fee income and a rise in net interest income. Net interest income itself rose 8% to $8.9 billion, a result HSBC linked to deposit growth and reinvestment at higher yields.
Expected credit losses grew by $400 million to $1.3 billion. The bank stated this increase was partly driven by a fraud-related exposure in the UK and by what it described as a more uncertain economic outlook tied to conflict in the Middle East.
Operating expenses climbed 8% to $8.7 billion, reflecting inflationary pressures, greater technology spend and higher performance-related pay. HSBC reported an annualised return on tangible equity of 17.3%, rising to 18.7% when excluding notable items.
Looking ahead
HSBC reiterated its objective of achieving a return on tangible equity of at least 17% over the 2026-2028 period. The bank also marginally lifted its 2026 net interest income guidance to around $46 billion, while cautioning that macroeconomic conditions remain volatile.
Reflecting the changed outlook, HSBC now expects credit losses to increase to approximately 45 basis points of loans this year, a revision higher than its prior guidance and an indication of the risks it sees from global economic uncertainty.
Sector impact and context
- Banking and wealth management: Wealth fee income and net interest income were central to the revenue increase.
- Credit markets and corporate lending: Rising expected credit losses and the new 45 basis point view on loan losses reflect heightened credit risk expectations.
- Operating cost structures: Inflation, technology investments and performance pay drove the rise in operating expenses.
HSBC highlighted specific operational headwinds including a fraud-related UK exposure and geopolitical uncertainty tied to the Middle East, which it said contributed to the higher expected credit loss charge and a cautious outlook.