HSBC stock falls almost 7% despite 32% jump in quarterly profit
HSBC shares dropped nearly 7% on Tuesday after third-quarter revenue missed forecasts and wealth income stalled, overshadowing a 32% rise in pre-tax profit and a new $1 billion share buyback.
Third-quarter revenue came in at roughly $18.6 billion, below analyst estimates near $19.1 billion, while adjusted earnings per share of $2.10 fell short of the $2.22 consensus. Pre-tax profit climbed 32% to around $9.6 billion, largely because the bank avoided repeating legal provisions it booked a year earlier. Stripping out one-off items, profit growth was closer to 10%, reaching about $10 billion.
Wealth management, previously a key growth driver, showed no progress this quarter, with revenue flat at roughly $2.7 billion after double-digit gains in the first half of the year. Net new money flows into Asia stayed solid at about $38 billion. Net interest income rose 6% to around $9.3 billion but landed slightly under expectations, with the net interest margin unchanged at 1.57%.
Competition for deposits intensified in Hong Kong and the UK, with time deposits now making up 38% of HSBC’s Hong Kong deposit base, a trend that tends to squeeze margins. Management pointed to this Hong Kong dynamic as the main drag on interest income.
Rather than raising its outlook, HSBC kept its targets unchanged: banking net interest income of at least $46 billion for 2025 and return on tangible equity of at least 17% through 2028. Chief Financial Officer Pam Kaur noted that markets sometimes anticipate guidance upgrades that do not materialize.
Credit losses improved, falling 17% to about $800 million on the back of lower Hong Kong commercial property charges, though the bank has set aside reserves tied to Middle East conflict risks. Its CET1 capital ratio eased slightly to 13.9%, and HSBC expects incoming Basel 3.1 rules to lift that ratio by 40 to 50 basis points starting January 2027, supporting further buyback capacity.
Why it matters for markets: HSBC’s results are a read on margin pressure across Hong Kong and Asian banking, as rising deposit costs can squeeze interest income even as rates stay elevated. The stock reaction also signals how sensitive bank valuations are to any sign of slowing growth momentum, which can ripple into broader financial-sector sentiment and the Hang Seng Index.
Source: investingLive