HSBC Holdings plc (NYSE:HSBC) reported first-quarter pre-tax profit that missed analyst estimates after taking a $400 million charge for a fraud-related exposure in the U.K. and setting aside more funds to cover fallout from the Middle East conflict.
"We regard this charge as idiosyncratic," Group Chief Financial Officer Pam Kaur told analysts, adding that a portfolio-wide review had not identified any comparable fraud concerns. "We have updated our risk appetite and are incorporating lessons in our due diligence processes."
The bank’s pre-tax profit for the first three months of the year was $9.37 billion, below the $9.59 billion average analyst estimate compiled by CNBC. Revenue for the quarter, however, rose 6% from the prior year to $18.62 billion, topping forecasts of $18.49 billion. The bank’s return on tangible equity, excluding notable items, was 18.7%.
The results were weighed down by a total of $1.3 billion in expected credit losses. This included the $400 million charge tied to the collapse of London-based property lender Market Financial Solutions and a $300 million precautionary provision for heightened uncertainty linked to the Middle East conflict. HSBC’s stock fell 1.98% in pre-market trading following the announcement.
Despite the charges, HSBC’s underlying business showed resilience, particularly in its Asia-focused wealth management division. The bank attracted $39 billion in net new money during the quarter, with $34 billion originating from Asia.
Wealth fee and other income grew 15% year-over-year to $2.7 billion, which Kaur said reflected successful investments in products and customer experience. The performance was driven by a 21% jump in investment distribution and a 19% rise in insurance, with Hong Kong being the standout market. The bank’s total wealth balances increased 12% from the previous year to $1.6 trillion.
Reflecting a mixed outlook, HSBC management updated two key pieces of its full-year 2026 guidance. The forecast for banking net interest income (NII) was raised to “at least $46 billion” from a prior $45 billion, citing an improved interest rate outlook.
Conversely, the bank increased its guidance for expected credit losses (ECL) as a percentage of average gross loans to around 45 basis points for the year, up from a previous outlook of 40 basis points. Kaur attributed the change to the charges taken in the first quarter and the persistent macroeconomic uncertainty. The bank maintained its medium-term target for a CET1 capital ratio of 14-14.5% and a dividend payout ratio of 50%.
This article is for informational purposes only and does not constitute investment advice.
