HSBC Holdings Earnings Call Shows Profits Amid Risks

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

HSBC Holdings’ latest earnings call balanced strong underlying performance with clear but contained risks. Management emphasized resilient profitability, rising wealth balances and disciplined capital returns, while acknowledging a bumpier quarter for credit costs and capital from a fraud hit and Middle East provisions. Overall tone was confident, with risks framed as manageable rather than structural.

Strong Profitability and Near-Record RoTE

HSBC reported profit before tax excluding notable items of $10.1 billion and an annualized RoTE of 18.7%, its best level in nearly 20 years. Management stressed that this profitability was broad-based and reinforces the bank’s ability to fund investment, absorb shocks and still deliver attractive shareholder returns.

Steady Revenue Growth Across the Franchise

Revenue excluding notable items rose 4% year on year to $19.1 billion, powered by banking net interest income and a healthy uplift in wealth-related fees and other income. This combination shows that HSBC is benefiting not just from rates, but also from fee-generating activities that support a more balanced earnings mix.

Upgraded Banking NII Despite Quarterly Dip

Banking net interest income increased $0.3 billion year on year to $11.3 billion, though it fell versus the prior quarter due to day-count effects, lower HIBOR and one-offs. Even so, full-year banking NII guidance was raised to about $46 billion, reflecting management’s more optimistic view on the interest rate environment.

Wealth Engine Accelerates

Wealth fee and other income climbed 15% year on year to $2.7 billion, with Private Banking up 8%, Asset Management up 3% and insurance-related income rising strongly. The insurance CSM balance increased 19% to $15.2 billion, underscoring a growing, recurring value pool in the group’s wealth and protection business.

Robust Wealth Balances and Asia-Driven Inflows

First-quarter wealth balances reached $1.6 trillion, a 12% increase or $170 billion higher than a year ago. Net new money of $39 billion in the quarter was heavily skewed to Asia at $34 billion, highlighting HSBC’s positioning as a key regional wealth and cross-border banking platform.

Broad-Based Business Segment Strength

All four major business segments grew revenues and delivered annualized RoTE above 17% excluding notable items. Management pointed to this spread as evidence that strategic initiatives are gaining traction across commercial banking, global banking, markets and wealth, rather than relying on any single engine.

Healthy Deposit and Loan Momentum

Deposits grew by $99 billion over the past 12 months, including held-for-sale balances, with corporate and institutional deposits up $10 billion quarter on quarter. Loan growth also picked up, particularly in CIB, Hong Kong and the U.K., suggesting improving client demand and supporting future interest income.

Simplification and Portfolio Reshaping

HSBC delivered an additional $0.2 billion of simplification savings in the quarter and remains on track for $1.5 billion in total. It completed the Hang Seng privatization, executed several disposals and agreed to sell its Indonesian retail business, which is expected to generate up to a $0.4 billion gain on completion.

Capital and Shareholder Payout Discipline

The CET1 ratio returned to the operating range at 14% after anticipated hits from strategic actions, including the Hang Seng transaction. The bank declared a $0.10 quarterly dividend, reiterated a target payout of 50% of EPS excluding material notables and kept share buybacks under active quarterly review.

Cost Control on Target, Timing Risks Remain

Costs rose 3% year on year in the quarter, above the roughly 1% medium-term growth target, but about 1 percentage point of that was higher variable pay accrual. On a target basis, cost growth was around 2%, leaving HSBC broadly on track for its 2026 ambition of about 1% annual cost growth versus 2025.

Elevated Credit Charge and Fraud Hit

Expected credit losses reached $1.3 billion in the quarter, equivalent to an annualized 52 basis points of loans and well above normalized levels. The charge included $0.3 billion linked to the Middle East conflict and a $0.4 billion Stage 3 hit from a fraud-related secondary securitization exposure that management described as idiosyncratic.

CET1 Drag from Strategic Transactions

The CET1 ratio fell 90 basis points in the quarter, largely due to the Hang Seng privatization, which alone cost about 110 basis points, and a loss on the Malta disposal. A further 12-basis-point impact came from bond revaluations, showing how balance sheet moves and markets can temporarily weigh on capital metrics.

Explaining the Quarter-on-Quarter NII Decline

Despite the upbeat full-year NII outlook, banking NII declined $0.5 billion sequentially, mainly due to non-structural factors. These included a $0.3 billion day-count effect, $0.1 billion of prior-quarter non-recurring gains, lower HIBOR in March and a $0.1 billion adverse one-off item.

Higher Quarterly Cost Growth and Phasing Risk

Management acknowledged that 3% cost growth in the quarter runs above the long-term 1% target and underscores phasing risk. Variable pay accrual was a key driver, contributing roughly 1 percentage point, but executives argued that this reflects stronger performance and should normalize over the year.

Notable Items and Restructuring Charges

Reported results were affected by several notable items, including a $0.3 billion loss from moving the Malta business to held for sale and a $0.2 billion loss on the sale of U.K. Life Insurance. There were also $0.1 billion of restructuring costs tied to simplification initiatives, reinforcing the near-term cost of streamlining the group.

Geopolitical Uncertainty and Middle East Risk

Management highlighted ongoing macro uncertainty from conflict in the Middle East and has built this into its stress scenarios and guidance. One modeled severe scenario includes sharp equity market declines, a spike in oil prices and material GDP slowdowns, underlining the bank’s cautious approach to risk planning.

Hong Kong Deposits and Commercial Real Estate

Retail deposit flows in Hong Kong softened in the quarter, although corporate inflows partly offset this trend, keeping overall funding stable. In commercial real estate, management reported only modest recoveries and warned that the Hong Kong CRE cycle cannot yet be considered definitively past its low point.

Selective Exit from Indonesian Retail Banking

The agreement to sell the Indonesian retail banking business marks a strategic pullback from that local retail market, even as corporate and institutional banking there remains. This move fits HSBC’s broader strategy of tightening its footprint to markets where it can achieve scale and returns above hurdle rates.

Guidance and Outlook: Profitable but Prudent

HSBC raised its full-year banking NII guidance to around $46 billion and set expected ECL at roughly 45 basis points, below the first-quarter run-rate once unusual items are excluded. It reaffirmed 2028 revenue growth ambitions, a RoTE target above 17%, a 50% dividend payout ratio and CET1 in the 14–14.5% range, alongside a 2026 cost growth goal of about 1%.

HSBC’s earnings call portrayed a bank delivering strong returns and wealth-driven growth while actively tidying its portfolio and cost base. For investors, the message was that one-off credit and capital hits are being absorbed by robust earnings power, with management leaning into disciplined payouts and cautious risk planning amid an unsettled macro backdrop.