The sell-off shows how much was already priced into HSBC after a strong run. Without a guidance upgrade, a revenue miss and stalled wealth growth were enough to trigger profit-taking. The read-across for Hong Kong and Asian banks is margin pressure: costlier time deposits threaten interest income just as the Fed’s hiking path keeps funding costs high. Oil matters indirectly, since inflation and rate uncertainty linked to the Iran war is weighing on bank valuations broadly, and HSBC is already setting aside provisions for the Middle East conflict. The Basel 3.1 capital boost from January 2027 gives HSBC room to expand buybacks, which could limit further downside once the disappointment fades.
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Earlier:
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HSBC delivered a big profit jump and another $1 billion buyback, but a revenue miss, flat wealth income and no upgrade to its targets were enough to send the shares sharply lower.
Summary:
- HSBC shares fell almost 7% on Tuesday after third-quarter revenue of around $18.6 billion missed forecasts of roughly $19.1 billion, and adjusted EPS of $2.10 missed $2.22.
- Pre-tax profit rose 32% to around $9.6 billion, helped by the absence of last year’s legal provisions. Excluding notable items, it rose about 10% to around $10 billion.
- Wealth revenue was flat at around $2.7 billion after strong growth in the first half. Net interest income rose 6% but was slightly below expectations.
- Deposit competition in Hong Kong and the UK is rising, with time deposits at 38% of the Hong Kong mix.
- Guidance was reaffirmed, not raised: banking NII of at least $46 billion in 2026 and a RoTE of at least 17% for 2026 to 2028.
- HSBC announced a new buyback of up to $1 billion. CET1 eased to 13.9%, with Basel 3.1 expected to add 40 to 50bp from January 2027.
HSBC shares fell almost 7% on Tuesday after third-quarter revenue missed forecasts and its wealth business stalled, overshadowing a 32% jump in pre-tax profit to around $9.6 billion and a fresh buyback of up to $1 billion.
Revenue came in at around $18.6 billion for the July to September quarter, short of the roughly $19.1 billion analysts had expected, while adjusted earnings per share of $2.10 missed the $2.22 consensus. Pre-tax profit was broadly in line with estimates, but the headline gain was flattered by the absence of legal provisions booked a year earlier. Excluding notable items, profit rose about 10% to around $10 billion.
The weakest spot was wealth, one of the bank’s main growth engines. Wealth revenue was flat at around $2.7 billion, after year-on-year growth of 15% and 23% in the first two quarters, although net new money in Asia remained strong at around $38 billion for the quarter. Net interest income rose 6% to around $9.3 billion, slightly below expectations, with the net interest margin, the gap between what the bank earns on loans and pays on deposits, steady at 1.57%.
Analysts flagged rising competition for deposits in Hong Kong and the UK as a pressure point. Time deposits, which pay savers higher rates, rose to 38% of HSBC’s Hong Kong deposit mix, a shift that tends to erode margins. Management said deposit competition in Hong Kong was the bigger factor for interest income.
Investors had also hoped for upgrades. HSBC reaffirmed, rather than raised, its guidance for banking net interest income of at least $46 billion this year and a return on tangible equity of at least 17% from 2026 to 2028, with revenue growth reaching 5% by 2028. Chief financial officer Pam Kaur acknowledged that the market sometimes expects guidance or targets to be lifted.
Credit quality held up. Expected credit losses fell 17% to around $800 million, helped by lower charges on Hong Kong commercial real estate, while the bank’s nine-month provisions include allowances for uncertainty linked to the Middle East conflict. The CET1 capital ratio slipped to 13.9%. HSBC expects incoming Basel 3.1 rules to add 40 to 50 basis points to that ratio from January 2027, against a 14% to 14.5% target range, and said buybacks remain its preferred way to return surplus capital.
The reaction leaves HSBC needing to show that wealth momentum can recover and that deposit costs will not eat further into margins when it reports full-year results.
This article was written by Eamonn Sheridan at investinglive.com.