HSBC Q1 Earnings Call Highlights

Key Points

• HSBC delivered a strong Q1 with profit before tax excluding notable items of $10.1 billion, revenue excluding notable items up 4% to $19.1 billion, RoTE excluding notable items of 18.7%, and declared a first‑quarter dividend of $0.10 while sticking to a 2026 dividend payout target of 50% of EPS (ex‑notable items).
• Management raised full‑year banking NII guidance to around $46 billion and updated 2026 expected credit loss guidance to about 45 bps after a Q1 annualized ECL charge of 52 bps that included precautionary charges for the Middle East conflict and a $0.4 billion fraud‑related exposure.
• HSBC pressed ahead with its simplification and Asia‑focused strategy—completing the Hang Seng privatization and other disposals (UK Life, Sri Lanka, South Africa) and agreeing to sell Indonesia retail—while wealth fee income grew 15% to $2.7 billion, wealth balances rose 12% to $1.6 trillion, and net new money was $39 billion (including $34 billion from Asia).

HSBC NYSE: HSBC reported what Group Chief Financial Officer Pam Kaur described as “another quarter of positive performance” in its first-quarter 2026 earnings presentation, with management reiterating its medium-term targets while updating two pieces of full-year guidance.

Profit before tax excluding notable items was $10.1 billion, while revenue excluding notable items rose 4% year-over-year to $19.1 billion, driven by banking net interest income (NII) and growth in wealth fee and other income, according to Kaur. Annualized return on tangible equity (RoTE), excluding notable items, was 18.7%, up 0.3 percentage points from last year and supported by the removal of Hang Seng Bank minorities following HSBC’s privatization of the unit.

HSBC declared a first-quarter dividend of $0.10 per share and said it continues to target a 2026 dividend payout ratio of 50% of earnings per ordinary share, excluding material notable items and related impacts.

Guidance updated for banking NII and credit charges

Management raised full-year banking NII guidance to around $46 billion, citing “an improved interest rate outlook,” while noting that interest rate curves have been volatile and could change, Kaur said.

Banking NII in the quarter increased $0.3 billion year-over-year to $11.3 billion, but fell $0.5 billion from the fourth quarter. Kaur attributed the sequential decline primarily to day-count impacts, a non-repeat of fourth-quarter gains, lower HIBOR in March, and a $0.1 billion adverse one-off.

In response to analyst questions about the implied run rate, Kaur said HSBC’s guidance “is around $46” and reflects the company’s usual conservatism, incorporating plausible downside scenarios, as well as uncertainty around interest rates and HIBOR.

HSBC also updated its expected credit loss (ECL) guidance for 2026 to around 45 basis points, compared with a first-quarter annualized ECL charge of 52 basis points. The quarter’s ECL charge totaled $1.3 billion, including a $0.3 billion precautionary charge related to the Middle East conflict and $0.4 billion tied to what Kaur described as “fraud related secondary securitization exposure with a financial sponsor in the U.K.”

Kaur emphasized that the stage 3 charge was “idiosyncratic and not representative of the risks in the wider portfolio,” adding that HSBC completed a review of its highest-risk areas and “have not identified any comparable fraud concerns.” The bank has updated risk appetite and is incorporating lessons into due diligence processes.

Simplification program and portfolio actions

Kaur said HSBC continued to simplify the group, executing a further $0.2 billion of simplification saves and remaining on course to deliver its $1.5 billion target. She also outlined several transactions completed during the quarter, including the privatization of Hang Seng Bank and sales of UK Life Insurance, Sri Lanka retail banking, and South Africa operations.

HSBC also agreed to sell its retail banking business in Indonesia, with completion anticipated in the first half of 2027 and an expected gain of up to $0.4 billion. Kaur said HSBC’s corporate and investment banking (CIB) business in Indonesia is unaffected and called Indonesia “a critical market for us from a CIB perspective” and “an important network market.” She said the retail business did not meet HSBC’s hurdle rate for its wealth strategy.

Wealth and transaction banking drive fee growth

HSBC’s wealth business delivered 15% growth in fee and other income to $2.7 billion, with Kaur noting that the first quarter typically benefits from favorable seasonality versus the fourth quarter. The bank added 287,000 new-to-bank customers in Hong Kong, and first-quarter wealth balances rose to $1.6 trillion, up 12% year-over-year (or $170 billion). Net new money was $39 billion, including $34 billion from Asia.

Within wealth, private banking grew 8% and asset management rose 3%. Investment distribution increased 21% and insurance grew 19%, with Hong Kong cited as the standout market. HSBC’s insurance contractual service margin (CSM) balance was $15.2 billion, up 19% versus the prior year.

On competitive dynamics in Hong Kong, Kaur said competition remains “fierce,” but HSBC continues to attract new customers and sees product mix shifts, including movement “from bonds and mutual funds into structured products and equities.” She added that after a slowdown in activity in the second half of March related to the conflict, momentum returned in April across the wealth franchise in Asia.

HSBC’s wholesale transaction banking showed mixed performance in the quarter. Kaur said fee and other income rose 2% year-over-year, and she highlighted demand from customers navigating volatility. Securities services grew 11% on new mandates and higher transaction volumes, trade rose 8%, and payments increased 3%, while foreign exchange declined 1% compared with a strong first quarter last year.

Costs, deposits, loans, and capital position

Kaur said HSBC remains on track to achieve 1% cost growth in 2026 compared with 2025 on a target basis. Target basis costs grew 3% year-over-year in the first quarter, including a 1% impact from higher variable pay accruals. Excluding variable pay accrual, target basis cost growth was around 2% year-over-year. Kaur said simplification actions are expected to be completed by mid-year, supporting greater savings in the second half.

On balance sheet trends, Kaur said deposits grew $99 billion over the last 12 months, including held-for-sale balances. CIB deposits increased $10 billion quarter-over-quarter, with Hong Kong a key driver. HSBC disclosed that 70% of deposits are in instant access accounts, which Kaur said illustrates the breadth of the deposit base.

Loan growth picked up during the quarter, reflecting continued momentum in global transaction services (GTS), higher term lending in Hong Kong, and drawdowns on committed lines by “high quality borrowers” in the Middle East. Kaur said Hong Kong returned to volume growth after a period of decline as the economy grew and residential property prices recovered. In the U.K., she said HSBC posted growth in mortgages and commercial lending, citing low levels of household and corporate debt as supportive for continued expansion.

HSBC’s CET1 ratio was 14%, down 90 basis points in the quarter following the Hang Seng Bank privatization and the Malta disposal loss. Kaur said HSBC was “already back to our operating range of 14%-14.5%” due to organic capital generation. She added that decisions on future share buybacks will continue to be made quarterly, considering capital generation, loan growth, the dividend payout ratio target, and any inorganic opportunities.

HSBC reiterated medium-term targets, including revenue growth rising to 5% year-over-year by 2028 (excluding notable items) and RoTE of 17% or better each year (excluding notable items). Kaur concluded that the quarter’s results show progress toward “a simple, more agile, growing HSBC,” while acknowledging that macro uncertainty is likely to persist.

About HSBC NYSE: HSBC

HSBC Holdings plc NYSE: HSBC is a multinational banking and financial services organization headquartered in London. It traces its origins to the Hongkong and Shanghai Banking Corporation, founded in 1865 to facilitate trade between Europe and Asia, and has since grown into one of the world's largest banking groups. The company is publicly listed in multiple markets, including the London Stock Exchange, the Hong Kong Stock Exchange and as an American depositary receipt on the New York Stock Exchange.

HSBC operates a universal banking model, serving retail, commercial, corporate and institutional clients.

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