HSBC shares fell on Tuesday as rising credit provisions soured first-quarter earnings, leading the bank to miss estimates.
HSBC delivered a steady first quarter, with reported profit before tax of $9.4bn, broadly flat year-on-year, as growth in Wealth fees and higher banking net interest income offset a heavier credit charge and rising costs.
But this was below expectations, and shares sank about 5% on Tuesday.
Banking NII rose $0.7bn to $11.3bn, helped by deposit growth and structural hedge reinvestment at higher yields.
Wealth was the other engine, with strong fee income out of International Wealth and Premier Banking and Hong Kong as customer activity picked up. Customer lending grew $20.1bn on a constant currency basis with growth across every segment.
The issues for investors were a $1.3bn charge, $0.4bn higher than Q1 2025, dragged up by a $0.4bn fraud-linked UK securitisation exposure and a $0.3bn top-up reflecting the deteriorating outlook following the late-February onset of conflict in the Middle East.
“HSBC’s exposure to faster growing developing economies brings extra growth potential but there are risks too, and the Iran conflict has prompted meaningful impairments alongside first-quarter results,” said AJ Bell head of markets Dan Coatsworth.
“These, plus provisions for fraud-related issues in the UK, cast a shadow over the quarterly numbers with earnings coming in below forecasts.
“The sizeable fraud-related charge is a reminder that risks don’t only exist in more far-flung parts of the world. It may also raise some questions about the robustness of controls within the business.”
Long-term investors won’t be overly concerned as today’s decline looks nothing more than profit taking after a strong run in the stock.
HSBC shares are 52% higher over the past year.