HSBC Q1 Profit Edges Lower as Costs and Credit Losses Rise

HSBC Holdings plc (LSE:HSBA) reported a slight decline in first-quarter profit, as higher credit charges and operating costs offset solid revenue growth driven by its wealth division and net interest income.

Europe’s largest lender posted profit before tax of $9.4 billion for the three months to March 31, down 1% from the same period last year. The bank attributed the decline to increased expected credit losses, higher expenses, and the impact of one-off items.

Shares Fall Despite Revenue Growth

HSBC shares dropped more than 5% in London trading following the results.

Revenue increased 6% to $18.6 billion, supported by strong fee income from wealth management and improved net interest income. Net interest income rose 8% to $8.9 billion, benefiting from deposit growth and reinvestment at higher yields.

Credit Losses and Costs Climb

Expected credit losses rose by $400 million to $1.3 billion, partly linked to a fraud-related exposure in the UK and a more uncertain economic backdrop tied to conflict in the Middle East.

Operating expenses increased 8% to $8.7 billion, reflecting inflationary pressures, higher investment in technology, and performance-related compensation.

HSBC reported an annualised return on tangible equity of 17.3%, or 18.7% excluding notable items.

Outlook: Strong Returns but Rising Risks

Looking ahead, the bank reaffirmed its target of achieving a return on tangible equity of at least 17% over the 2026–2028 period. It also slightly raised its 2026 net interest income guidance to around $46 billion, while cautioning that macroeconomic conditions remain uncertain.

“Q1 26 results contained a fair amount of noise across revenue and cost lines, but the underlying picture is one of a mildly stronger banking NII print and ongoing strength in Wealth. On this point, ’26E banking NII guidance has been raised to $46bn (in-line with street),” Jefferies analysts commented.

The bank now expects credit losses to reach around 45 basis points of loans this year, higher than previous guidance, highlighting continued exposure to global economic risks.