HSBC Raises Pre-Tax Profit 32% to $9.6 Billion Despite Forecast Miss
Key Facts
HSBC raised third-quarter 2026 pre-tax profit 32% to $9.6 billion, compared with $7.3 billion in the same period last year, according to its results statement issued on October 27. The result came in below the average estimate of $9.7 billion in a survey conducted by the bank, Reuters reported. HSBC attributed most of the annual increase to a favorable net impact from notable items of $1.4 billion. This reflected the absence of legal provisions of the same amount recorded in the third quarter of 2025. Profit after tax rose 38% to $7.6 billion, putting profit growth at the forefront of quarterly results that also benefited from higher revenue and lower credit losses.
Revenue increased by $0.8 billion to $18.6 billion compared with the third quarter of 2025, the bank said. On a constant-currency basis and excluding notable items, revenue rose by the same amount to $18.7 billion. Banking net interest income increased by $0.6 billion to $11.7 billion, while the net interest margin remained unchanged at 1.57% from a year earlier. HSBC said deposit growth and reinvestment of structural hedges at higher yields supported net interest income, while headwinds in Markets Treasury and one-off items weighed on it. The bank maintained its forecast for banking net interest income of at least $46 billion in 2026. The combination of income growth and a stable margin indicates that higher activity and deposit volumes helped support revenue during the quarter.
Expected credit losses were $0.8 billion, down $0.2 billion, or 17%, from the third quarter of 2025. HSBC attributed the decline mainly to a $0.1 billion reduction in Stage 3 charges related to commercial real estate in Hong Kong. Lower charges in the UK and Mexico also contributed to reducing credit losses. On expenses, operating expenses fell 12% to $8.8 billion from a year earlier. But target-basis expenses rose 1.4% after excluding notable items. These indicators show a divergence between the annual decline in total expenses and the measure the bank uses to track costs on a target basis.
Annualized return on average tangible equity was 17.7% in the third quarter, compared with 12.3% a year earlier, and rose to 18.2% excluding notable items. Chief Executive Georges Elhedery said customers continued to turn to the bank “to navigate uncertainty and capture new opportunities.” He added that the group was focused on executing its strategic priorities and simplifying the bank. On the balance sheet, customer lending balances rose $7.8 billion on a reported basis compared with the second quarter of 2026, and $6.7 billion on a constant-currency basis. Lending growth included India, the UK and Hong Kong, while the bank said the classification of loans in its Australian retail business, which it plans to exit, as held for sale could be increased in part.
Customer accounts increased by $9.1 billion on a reported basis compared with the second quarter, and by $6.5 billion on a constant-currency basis. HSBC attributed the increase to continued deposit inflows in Hong Kong and growth in India. This was partly offset by Australian retail deposit outflows following the bank’s announcement that it intended to exit the business, as well as a decline in short-term balances in corporate banking. These movements provide context for lending and net interest income growth during the quarter, while highlighting differing deposit trends across markets and businesses. On shareholder returns, the board approved a third interim dividend of $0.10 per share for the 2026 financial year. The bank also announced its intention to begin a share buyback of up to $1 billion, to be completed by the announcement of its 2026 annual results.
HSBC shares listed in Hong Kong fell 5.56% to HK$134.30 in trading on October 27, after hitting an intraday low of HK$132.60, according to Investing.com. At the same time as this report, the Hang Seng Index was down 0.73% in afternoon trading. The share move followed results that fell short of the average estimate, despite higher profit and revenue and lower credit losses. HSBC is targeting a return on average tangible equity of 17% or better in 2026, 2027 and 2028, excluding notable items. It is also targeting annual revenue growth from 2026 to 2028, reaching 5% in 2028 compared with 2027 on a constant-currency basis and excluding notable items. The bank set February 23, 2027, as the date for announcing its 2026 annual results.