HSBC Holdings PLC (NYSE:HSBC) shares are trading lower after the bank reported worse-than-expected third-quarter financial results, with adjusted earnings and revenue missing analyst estimates.
The bank’s wealth revenue remained flat at $2.7 billion following growth of 15% and 23% in the previous two quarters. The sell-off highlights rising investor expectations following strong results from European banks, despite inflation and interest-rate uncertainty linked to the Iran war, Reuters reported.
Earnings Snapshot
Adjusted EPS came in at $2.10, below the consensus estimate of $2.22. Revenue of $18.62 billion also fell short of expectations of $19.09 billion.
Despite missing estimates, HSBC reported stronger year-over-year (Y/Y) profitability, supported by higher revenue and lower credit losses. Profit before tax rose 32% Y/Y to $9.6 billion, while profit after tax increased 38% to $7.6 billion.
Results included a $1.4 billion benefit from notable items, primarily reflecting the absence of legal provisions recorded in the third quarter of 2025, alongside higher revenue and lower credit losses.
Revenue increased Y/Y, driven by higher banking net interest income (NII) and increased fee income from corporate banking, markets and wealth management. Constant-currency revenue excluding notable items also rose by $0.8 billion to $18.7 billion.
Annualized return on average tangible equity (RoTE) improved to 17.7% from 12.3% a year earlier. Excluding notable items, RoTE reached 18.2%, up 1.6 percentage points.
Net Interest Income And Credit Quality
NII increased 6% Y/Y to $9.3 billion, while banking NII climbed by $0.6 billion to $11.7 billion. Net interest margin remained stable at 1.57%.
Expected credit losses declined 17% to $0.8 billion, reflecting lower charges related to commercial real estate in Hong Kong, as well as lower charges in the UK and Mexico.
Lending, Deposits And Capital
Customer lending balances increased $7.8 billion sequentially on a reported basis, while customer accounts rose $9.1 billion during the quarter.
On a constant-currency basis, lending grew $6.7 billion and deposits increased $6.5 billion, supported by growth in Hong Kong, the UK and India. These gains were partly offset by deposit outflows associated with HSBC’s planned exit from Australian retail banking.
HSBC’s common equity tier 1 (CET1) ratio declined 0.2 percentage points from June 30, 2026, to 13.9%.
The bank approved a third interim dividend of 10 cents per share and completed its $1 billion share buyback on Sept. 28, 2026.
It also plans another buyback of up to $1 billion by the release of its 2026 full-year results.
Outlook
HSBC reaffirmed its target for RoTE of at least 17% in 2026, 2027 and 2028, excluding notable items. It expects constant-currency revenue growth each year through 2028, reaching 5% in 2028, and maintains its target dividend payout ratio of 50% for all three years.
For 2026, HSBC expects banking NII of at least $46 billion, expected credit losses of around 45 basis points of average gross customer loans, and target-basis operating expense growth of approximately 1% Y/Y.
The bank cautioned that strong business performance could lead to additional performance-related pay and slightly higher cost growth. Its medium-term expected credit loss planning range remains 30–40 basis points.
HSBC expects the final Basel 3.1 rules to increase its CET1 capital ratio by approximately 40–50 basis points from Jan. 1, 2027, subject to modeling refinements and regulatory approvals. The bank continues to target a CET1 ratio of 14%–14.5%.
HSBC Stock Price Activity: HSBC Holdings shares are trading lower by 6.57% at $85.22 during premarket trading on Tuesday, according to Benzinga Pro data.
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