HSBC profit drops after Iran war and private credit charges bite
HSBC missed its profit target in the first quarter of the year after the blue-chip lender booked a mammoth credit charge.
The FTSE 100 giant – which boasts a huge £230bn market cap – recorded a pre-tax profit of $9.4bn (£6.5bn), missing the $9.6bn pencilled in by analysts. This figure is also down $100m on the sum recorded for the same period last year.
The fall came despite revenue notching six per cent growth at $18.6bn following a continued strong performance in the bank’s wealth division.
Net new money for the wealth arm topped $39bn in the quarter, with the lion’s share of $34bn of this coming Asia.
HSBC’s net interest margin reached 1.6 per cent, just a basis point higher than last year. But the bank upgraded its net interest income target to around $46bn for 2026, from “at least $45bn” previously.
It comes after the Iran was fanned inflationary fears across the globe, leaving central banks hesitant to take the chop to interest rates.
HSBC posts surge in credit charges
But a major portion of this growth was offset by the $1.3bn credit charge recorded by the bank.
The figure was a major jump on the $400m charge recorded in the first quarter of 2025. Around $300m of the new hit was put down to the conflict in the Middle East.
HSBC increased its forecast for loan losses in 2026 to 45 basis points, meaning the bank was bracing for $4.50 of every $1,000 it has lent out to go unpaid. This was attributed to “ongoing uncertainty in the outlook”.
“In terms of ongoing activity on the ground, we don’t see as many changes. And more importantly, credit portfolio has remained resilient through this period as well,” Pam Kaur, HSBC’s finance boss said.
Meanwhile, the lender also recorded a $400m fraud-related charge in the UK. It did not identify the company involved. Kaur said the charge involved loans that the bank had issued to an unnamed private equity group, which was then exposed to private credit-related loans.
She added HSBC had an overall “small” exposure to the private credit industry at around $6bn.
“We’ve always been very mindful of private credit risks.”
The bank said it had a total of $3bn in exposure to such securitisation financing, which refers to the pooling of various types of contractual debt, such as residential mortgages, commercial loans, or auto loans, and selling them as tradeable securities to investors.
The surge in provisions continued a trend seen across the London market’s top banking giants throughout reporting season.
The FTSE 100’s Big Five – which counts HSBC alongside its peers Natwest, Standard Chartered, Lloyds and Barclays – all hiked loan loss provisions in the quarter on the account of market volatility.
Barclays set aside £823m for potential loan losses, up from £643m in the same period last year, in a stark sign the firm was bracing for an economic crunch. But, in a similar case to HSBC, a significant portion of this at £228m was driven by a UK fraud charge, relating to Barclays’ exposure to MFS.
Lloyds set aside £295m for sour loans, which £101m was attributed to the “deterioration in economic outlook as a result of the Middle East conflict”. Standard Chartered booked $296m in credit impairment charges, with $190m of this related to Iran war “overlays”.