HSBC shares jump as lender ups bad loan provisions after tariff chaos
HSBC shares rose in early trading after the lender increased provisions for loan losses in its first-quarter report.
The FTSE 100 giant’s stock jumped two per cent as trade war woes clouded the lender’s results.
The bank raised expected credit losses to $876m (£653m), from $202m in a stark indication of firm’s outlook on the global economy.
This follows a bruising period for the lender’s stock after President Donald Trump’s erratic tariff agenda triggered a global trade war. Shares plummeted 15 per cent in the week following Trump’s sweeping levies on trading partners.
Despite the waning market backdrop, the London-based business introduced a share buyback of $3bn in its first quarter report.
HSBC was particularly stung by the steep levies slapped on Asia and the escalating trade war with the US and China, due to the bank’s historical exposure to the region.
The bank said it would complete the buyback before its 2025 interim results.
The first quarter reporting period narrowly missed Trump’s ‘Liberation Day’ on April 2, which kicked off the market turmoil.
HSBC’s profit and revenue beat expectations
The FTSE 100 giant booked $9.48bn in pre-tax profit, compared to $7.83bn pencilled in by analysts.
Revenue for the first three months of the year hit $17.65bn, beating analyst estimates of $16.67bn.
This was driven by a 25 per cent jump in its corporate and institutional arm’s fee income to $3.7bn as the bank cashed in on the tariff-induced market volatility.
Revenue from debt and equity markets was up 47 per cent to $1bn and wholesale transaction banking increased 14 per cent $2.5bn.
But, group revenue fell 15 per cent year-on-year. Profits were down 25 per cent from last year.
The lender said this reflected the one-off positive disposals in 2024’s first quarter, including the $4.8bn sale of its Canadian banking business.
Matt Britzman, senior equity analyst at Hargreaves Lansdown, said: “For investors, this is exactly what they want to see: a core business holding up well just as the global outlook turns murky.”
Britzman added: “A big part of out performance came from strong fee income in areas like currency trading and wealth management – two bright spots that helped support a solid showing from its more traditional banking operations.”
HSBC’s net interest margin – a metric used to show a bank’s profitability from lending – reduced by four basis points to 1.59 per cent.
Net interest income fell by $400m to $8.3bn, reflecting Bank of England whittling interest rates down to 4.5 per cent from a post-financial crisis high of 5.25 per cent last July.
The bank warned on the changing economic climate due to geopolitical tensions.
“The macroeconomic environment is facing heightened uncertainty, in particular from protectionist trade policies, creating volatility in both economic forecasts and financial markets and adversely impacting consumer and business sentiment,” HSBC said.
It added its “conservative approach to credit risk and strong deposit franchise” would well-position the bank for upcoming challenges.
Georges Elhedery, HSBC’s chief executive, said: “Our strong results this quarter demonstrate momentum in our earnings, discipline in the execution of our strategy and confidence in our ability to deliver our targets.
“We continue to support our customers through this period of economic uncertainty and market unpredictability, which we enter from a position of financial strength.”