HSBC Earnings Call Shows Profits, Wealth Momentum

HSBC Holdings plc ((HSBC)) has held its Q1 earnings call. Read on for the main highlights of the call.

HSBC’s latest earnings call struck an upbeat tone, with management foregrounding strong profitability, double‑digit returns and powerful wealth inflows despite a handful of one‑off credit issues. Executives argued that robust revenue growth, capital generation and disciplined costs more than outweigh short‑term noise from fraud‑related charges, geopolitical risks and transactional capital hits.

Strong Profitability and RoTE

HSBC delivered profit before tax of $10.1 billion excluding notable items, underlining the strength of its core franchise. The annualized return on tangible equity reached 18.7% on the same basis, a level not seen in nearly two decades and a key proof point for the bank’s strategic overhaul.

Revenue Growth

Group revenue excluding notable items rose 4% year‑on‑year to $19.1 billion, powered by banking net interest income and a growing contribution from wealth fees and other income. Management highlighted this as evidence that the bank is not just riding rates, but also building more diversified, fee‑driven revenues.

Upgraded Banking NII Guidance

Banking net interest income increased $0.3 billion year‑on‑year to $11.3 billion, even though it declined sequentially. On the back of a more supportive rate outlook, HSBC upgraded its full‑year banking NII guidance to around $46 billion, signaling confidence in ongoing earnings power from the balance sheet.

Wealth Franchise Momentum

Wealth fee and other income jumped 15% year‑on‑year to $2.7 billion, with solid gains across all major product lines. Private Banking grew 8%, Asset Management 3%, while investment distribution and Insurance surged 21% and 19% respectively, pushing the Insurance CSM balance up 19% to $15.2 billion.

Strong Wealth Balances and Net New Money

Total wealth balances reached $1.6 trillion in the first quarter, up 12% or $170 billion over the past year. Net new money of $39 billion in the quarter, including $34 billion from Asia, underscored HSBC’s positioning as a key conduit for regional and cross‑border wealth flows.

Broad-Based Business Performance

All four business segments grew revenues in the period, showing that momentum is not confined to a single division. Each segment also produced an annualized RoTE above 17% on an ex‑notable items basis, reinforcing management’s claim that its strategy is gaining traction across the portfolio.

Deposit and Loan Momentum

Deposits increased by $99 billion over the last 12 months, including balances held for sale, with Corporate and Investment Banking deposits alone rising $10 billion quarter‑on‑quarter. Loans also picked up, particularly in CIB and in markets such as Hong Kong and the U.K., signaling improving demand and balance‑sheet growth.

Simplification and Strategic Actions

The bank booked a further $0.2 billion of simplification savings in the quarter and remains on track for its $1.5 billion target. It also completed the Hang Seng privatization and several disposals and agreed to sell its Indonesian retail business, which is expected to generate a gain on completion in the second half of 2027.

Capital and Payout Discipline

HSBC’s CET1 ratio stood at 14%, back within its operating range after expected transactional impacts. Alongside a quarterly dividend of $0.10 per share, management reiterated a 50% payout ratio target based on earnings excluding material notable items and kept the option open for further buybacks.

Cost Management Progress

Costs grew 3% year‑on‑year in the quarter, but management said they remain on course for around 1% cost growth in 2026 on a target basis. Stripping out about 1 percentage point from higher variable pay accruals, underlying cost growth was closer to 2%, showing continued expense discipline.

Elevated Q1 Credit Charge and Fraud Exposure

The first quarter expected credit loss charge rose to $1.3 billion, equivalent to an annualized 52 basis points of loans. This included a $0.3 billion reserve tied to Middle East conflict risk and a $0.4 billion fraud‑related loss on a secondary securitization exposure, which management stressed was idiosyncratic but still lifted impairments.

Quarterly CET1 Impact from Transactions

HSBC’s CET1 ratio fell by 90 basis points in the quarter, largely due to strategic moves rather than underlying weakness. The Hang Seng privatization alone accounted for a 110 basis‑point drag, while the Malta disposal loss and fair value movements on bonds added further modest pressure.

Banking NII Quarter-on-Quarter Decline

Despite the upgraded annual guidance, banking NII fell $0.5 billion versus the prior quarter. Management attributed this to a $0.3 billion day‑count effect, non‑recurring gains in the base period, softer HIBOR in March and a one‑off headwind of about $0.1 billion.

Higher Quarterly Cost Growth

The 3% year‑on‑year cost increase ran ahead of the 1% full‑year target, raising questions about timing risk. Executives argued that roughly one‑third of the growth reflected variable pay accruals, suggesting the underlying cost path remains aligned with medium‑term ambitions.

Material Notable Items and Restructuring Costs

Notable items weighed on reported numbers, including a $0.3 billion loss from moving Malta operations to held for sale and a $0.2 billion loss on the sale of the U.K. Life Insurance business. There was also $0.1 billion in restructuring costs tied to ongoing simplification efforts, which management described as necessary to unlock future savings.

Uncertainty from Middle East Conflict

Management highlighted macro uncertainty stemming from the Middle East and embedded this risk into its stress scenarios and guidance. Modeled severe shocks included sharp equity market declines, higher oil prices and weaker global growth, which the bank believes it can absorb within its current capital and earnings framework.

Hong Kong Retail Flow Variability and CRE

Retail deposit flows in Hong Kong slowed in the quarter, though corporate inflows helped offset that softness. In commercial real estate, only modest recoveries have been seen and management does not view the sector as definitively out of its downcycle, keeping a cautious stance on related risks.

Strategic Retraction in Indonesian Retail

The agreed sale of the Indonesian retail banking business marks a selective retreat from that market’s mass segment. HSBC will retain its CIB presence in Indonesia, aligning its footprint with areas of higher strategic return rather than maintaining sub‑scale retail operations.

Forward-Looking Guidance and Outlook

HSBC raised its 2026 guidance for full‑year banking NII to around $46 billion and set expected ECL at roughly 45 basis points, slightly below the elevated level seen in Q1. It reiterated medium‑term aims for revenue growth to reach 5% by 2028, RoTE of at least 17%, a 50% dividend payout ratio and CET1 held between 14% and 14.5%, alongside tight cost control.

HSBC’s earnings call painted a picture of a bank generating strong returns and deepening its wealth and transaction banking franchises, while managing through pockets of credit and macro risk. For investors, the combination of upgraded NII guidance, resilient capital, disciplined payouts and clear strategic execution keeps the equity story firmly skewed to the upside, albeit with geopolitical and idiosyncratic credit events still on watch.