HSBC (HSBC) Q3 2026 earnings review
HSBC's profit rises 10%, but capital slips below target
HSBC's corporate bank earned more from trading and payments, while its wealth fees stood still. Profit before tax rose 10% once last year's legal provisions and other one-offs are set aside, and chief executive Georges Elhedery kept every full-year target. Hong Kong savers, though, are shifting into term deposits, so interest income barely moved from last quarter.
| Revenue, excluding one-offs | $18.7bn +4.5% from a year ago at constant currency |
|---|---|
| Profit before tax, excluding one-offs | $10.0bn +10% from a year ago |
| Return on tangible equity, excluding one-offs | 18.2% 16.6% a year ago; target 17% or better |
| Full-year outlook | Unchanged banking net interest income of at least $46bn |
⚖️ Verdict: 🟢 Bullish
The story got better because fees now do work that interest income used to do: corporate clients paid more for currency trading, payments and financing, and costs grew slowly enough for that to reach profit. One caution: the core capital ratio slipped just below HSBC's own range, and the bank itself flagged "emerging customer and competitive pressure on deposits".
The question now is whether deposit costs eat the margin before fee growth replaces it. Either Hong Kong term-deposit rates ease and the deposit growth turns into income, or competition keeps them high and interest income stalls. Next quarter's banking net interest income, against this quarter's $11.7 billion, will tell.
🐂 Bull Case
Trading and Payments Fees Lifted the Corporate Bank
HSBC's Corporate and Institutional Banking unit, which serves large companies and investors outside Hong Kong and the UK, earned 10% more revenue than a year ago. Its profit before tax rose by a third, and the unit now brings in two-fifths of group revenue.
Fees, not lending, drove the gain. Chief executive Georges Elhedery said clients "continue to turn to us to navigate uncertainty and seize new opportunities", and the currency desk shows what he means: foreign-exchange fees grew 19% on "strong client demand amid market volatility", according to finance chief Pam Kaur's slides.
- Fee and other income in the unit: up 18% from a year ago
- Transaction banking fees (payments, trade, custody, currency): up 12%
- Debt and equity markets fees: up 70%, mainly in prime finance
- Unit profit before tax: $3.6 billion, up 34%
This matters because fees do not depend on interest rates, so they cushion profit if deposits cost more. But volatility fed the currency desk this quarter, and calmer markets would take some of that income back, so the trading figure needs a second quarter.
What to watch: next quarter's fee income in the unit excluding foreign exchange. Near double-digit growth in payments, trade and custody would mean customers moving money, not volatile markets, drive the gain.
Credit Losses Fell to a One-Year Low
HSBC set aside $0.8 billion for bad loans this quarter, down 18% from a year ago and the smallest charge in five quarters. Finance chief Pam Kaur's slides said the charge was "driven by Stage 3 charges", meaning loans already in default rather than new allowances against the economy.
The company said a $0.1 billion smaller charge on Hong Kong commercial property drove the fall. Hong Kong property is not fixed, though: the lender raised its allowance there again, citing "continued pressure on property valuations", and the average loan-to-value on impaired loans reached 83%.
What to watch: the fourth-quarter charge against this quarter's $0.8 billion. By our math the full-year plan leaves room for a charge nearly double this one, so another reading like this would say management set the plan with caution rather than that losses are rising.
Costs Rose 1% While Revenue Grew 5%
HSBC measures spending on a "target basis" that strips out restructuring charges and other one-offs. On that measure costs rose 1.4% from a year ago, well behind revenue growth excluding one-offs of 4.5%. That gap pushed operating costs down to 45.5% of revenue. Inflation and technology spending pushed costs up, the company said, and reorganisation savings held them back.
The reorganisation is nearly done. HSBC has actioned $1.9 billion of annual savings against a $2 billion target for the end of this year. Of that, $1.4 billion has already shown up in reported costs.
What to watch: fourth-quarter costs. Finance chief Pam Kaur's slides warned the lender "may consider increasing variable pay which would increase costs modestly" if performance holds. A bigger bonus accrual would mean the full-year plan of about 1% growth slips, since nine months are already up 2%.
🐻 Bear Case
Hong Kong Savers Are Demanding Higher Interest Rates
Finance chief Pam Kaur's slides call HSBC's deposit base a "strong and growing deposit franchise", and deposits rose $105 billion over the year. The same slides admit "emerging customer and competitive pressure on deposits" in Hong Kong and the UK, and the numbers show it.
Banking net interest income, the interest the lender earns on loans after what it pays depositors, barely moved from last quarter. Net interest margin, that income as a share of earning assets, fell 5 basis points to 1.57%.
- Hong Kong time deposits: 38% of customer deposits, after four quarters at 36%
- Cost of each 1-point shift into time deposits: about $0.2 billion a year, the slides said
- Hong Kong deposits: up $21 billion from June, "mainly time deposits"
This matters because interest income is 62% of HSBC's revenue, and deposit growth only helps if the bank keeps most of the rate it earns. When savers move into term deposits the bank hands more of that rate to them, so balances grow while the margin shrinks. The Hong Kong unit already blamed "lower average margins on time deposits due to market competition" for holding back its interest income.
What to watch: the time-deposit share of Hong Kong deposits next quarter and the quarterly change in banking net interest income. A share above 40% with no income growth would mean HSBC is paying for deposits rather than earning from them.
Capital Ratio Slipped Below the Target Range
HSBC aims to hold common equity tier 1 capital, its core buffer against losses, at 14% to 14.5% of risk-weighted assets. The ratio ended the quarter at 13.9%, just below that range, after sitting inside it in June.
Three things pulled it down: $16 billion more risk-weighted assets from lending growth and a new model for large corporate loans, a $2.6 billion reserve loss on bonds held for sale as yields rose, and the buyback announced at the interim results.
This matters because HSBC announced another buyback of up to $1 billion, which it said will cost about 10 basis points in the fourth quarter. New Basel rules should add 40 to 50 basis points in January 2027, so until then the capital returned runs ahead of the capital held.
What to watch: the year-end capital ratio. A reading below 14% before the Basel benefit arrives would put the size of the next buyback in question.
Wealth Fees Stalled as Insurance Income Dropped
HSBC calls itself Asia's top wealth manager, so Wealth fees are meant to be its second growth business after transaction banking. This quarter they did not grow: Wealth fee and other income came in at $2.7 billion, level with a year ago. International Wealth and Premier Banking, the division housing the private bank, insurance and asset management, saw profit fall 14%.
- Insurance fees: down 16%, on the "non-recurrence of one-off impacts in prior period and the adverse impact from strategic transactions"
- Investment product sales: up 7%, led by mutual funds and structured products
- Private bank: up 16% on "higher trading activities and growth in mandates"
Demand looks healthy: clients added $41 billion of net new money, more than triple a year ago, mostly in Asia. But new Hong Kong insurance premiums slipped to $1.4 billion from $1.6 billion in June, and the Singapore life insurer HSBC is selling already drags on the comparison.
What to watch: Wealth fee income next quarter, excluding the businesses HSBC is selling. Growth near 10% would show the disposals, not demand, caused the pause.
👓 Other Themes
Fifteen Exits Announced, Nine Completed
HSBC completed the sale of its Uruguay bank this quarter and announced three more exits: Australian retail banking, Egyptian retail banking and its Singapore life insurer, while it reviews retail and small-business banking in Türkiye. The company said the moves are "simplifying our entity footprint". The Singapore sale should bring a $1.8 billion gain in the first half of 2027, which HSBC will exclude from the profit that sets its dividend.
Rising Rates Help Lending Income, Hurt Bond Values
Central banks have turned. The company said "the US Federal Reserve has raised its interest rate once, while the BoE has left its policy rate unchanged", after markets had expected cuts at the start of the year. Higher rates lift lending income, which HSBC puts at $2 billion for a one-point rise, but they cut bond values, the main reason capital fell. Its economists now give a 25% weight to a downside case for the UAE.
💲 Other KPIs
Customer loans reached $1,030 billion, up 5% from a year ago at constant currency. The quarter added $6.7 billion, less than in each of the two quarters before. Growth came from the UK, Hong Kong and lending that lets Indian clients join a foreign-currency deposit scheme, while $26 billion of Australian home loans moved to held-for-sale ahead of their sale.
The structural hedge, a book of fixed-rate assets that smooths HSBC's interest income, grew to $655 billion from $637 billion in June. Maturing assets are replaced at prevailing rates. About $20 billion matures in the fourth quarter at an average yield of 2.8%. Five-year government yields now sit near 5%, so each replacement adds income, which the release credits for most of this year's interest-income growth.
Tangible net asset value per share, the book value of the business per share after stripping out goodwill, rose 5 cents in the quarter to $9.41. Profit added 45 cents. Dividends, the buyback and losses on bonds and hedges booked through reserves took most of it back, so the measure has moved little since March.
🔮 Guidance
Unchanged. HSBC still expects at least $46 billion of banking net interest income this year, the interest it earns from lending after funding costs. Nine months have delivered $34.6 billion, so by our math the floor needs only $11.4 billion in the fourth quarter. That is 2% below this quarter, so the floor looks cautious; the question is how far above it the final quarter lands.
Unchanged. The plan still allows credit losses of about 45 basis points of loans for the year, "reflecting ongoing uncertainty", finance chief Pam Kaur's slides said. Nine months ran at 41. By our math, reaching 45 would take a fourth-quarter charge near $1.5 billion, almost double this quarter's $0.8 billion. Either losses rise in the fourth quarter, or the plan has room in it.
Unchanged, with a caveat. Costs on the target basis should grow about 1% this year, but Kaur's slides said HSBC "may consider increasing variable pay which would increase costs modestly" if performance holds. Nine months are up 2%, so by our math the fourth quarter must come in about 2% below last year's fourth quarter to hit the plan. The reorganisation savings make that possible; a bonus top-up would not.
Unchanged. HSBC still targets a return on tangible equity of 17% or better each year through 2028, excluding one-offs. Nine months delivered 18.8%, so this year looks safe unless the fourth quarter brings a large credit charge. Each of the four businesses earned above the target.
Unchanged. Revenue excluding one-offs should grow every year and reach 5% growth in 2028. This quarter's 4.5% is already close. HSBC counts the businesses it is leaving as worth about $2.2 billion of annual revenue by 2028, so the remaining businesses must grow faster than the headline to deliver the target.
Unchanged, though the ratio sits below it. HSBC intends to keep core capital between 14% and 14.5% of risk-weighted assets; it ended the quarter at 13.9%. The company expects new Basel rules to add 40 to 50 basis points on 1 January 2027. Before then, the new buyback costs about 10 basis points, so the return inside the range depends on the rule change.
Unchanged. HSBC pays out half of profit per share, excluding large one-offs such as disposal gains. A third dividend of $0.10 per share brings this year's declared total to $0.30, with a further $0.35 accrued but not yet announced, according to Kaur's slides.
❓ Key Questions
How large will the fourth-quarter bonus accrual be?
The cost plan of about 1% growth requires fourth-quarter costs to fall about 2% from a year ago by our math, yet the slides say variable pay may rise. The gap between those two statements decides whether the plan holds.
Why does the credit plan imply a charge near $1.5 billion?
Nine months ran at 41 basis points and this quarter at 31, but the full year still says about 45. Management did not say which portfolio or scenario would produce such a jump in the fourth quarter.
What rate is Hong Kong paying on new time deposits?
Time deposits rose to 38% of Hong Kong deposits and each 1-point shift costs about $0.2 billion a year. The actual rate paid versus the rate earned on the structural hedge would show whether the deposit growth adds profit.
When does the capital ratio return above 14%?
The ratio sits at 13.9% with another $1 billion buyback to fund before the Basel benefit in January 2027. Management did not say whether it would pause buybacks if the ratio stayed below the range at year-end.
How much of India's deposit inflow will stay after the scheme ends?
India added $15 billion of foreign-currency deposits and $14 billion of related lending in one quarter, lifting risk-weighted assets by $6.6 billion in the wealth division. The duration of those balances and their margin are not disclosed.