HSBC has seen first-quarter profits miss expectations after taking a 1.3 billion dollar (£960 million) hit on bad debts including a fraud-related charge in the UK and impact from the Middle East war.
The UK-based lender reported pre-tax profits of £9.4 billion US dollars (£6.96 billion), down slightly from 9.5 billion (£7 billion) a year earlier, but lower than forecast.
The fall came as it announced an unexpected 400 million dollar (£295 million) loss linked to a fraud case in the UK, relating to loans made to a private equity firm, which in turn had exposure to a private-credit firm in its corporate and institutional banking (CIB) business.
HSBC did not disclose the companies involved.
Fellow UK bank Barclays last week announced an £823 million provision for bad debts in its first-quarter results.
This was largely driven by a £228 million impairment charge related to the collapse of UK property lender Market Financial Solutions (MFS) earlier this year amid allegations of fraud.
There are increasing regulatory concerns surrounding the private credit market as a source of financial risk in the UK and worldwide, given the layers of complexity in the sector.
HSBC said its exposure to the private-credit market was small in relation to its overall balance sheet.
HSBC also set aside 300 million dollars (£222 million) because of “heightened uncertainty” and worsening economic outlook in relation to the Iran war.
It said the overall 1.3 billion dollar (£960 million) expected credit loss charge – up 50% on a year ago – also included an impact from higher trade tariffs.
First quarter results from HSBC showed its revenues increased 6% year on year to 18.6 billion dollars (£13.7 billion), driven by strong performance in wealth management and the Hong Kong business segment.
Shares in the firm fell 5% in morning trade on Tuesday.
“We continued to make positive progress in creating a simple, more agile, growing HSBC,” chief executive Georges Elhedery said.
“Each of our four businesses contributed to firm-wide revenue growth.”
He added: “In periods of greater uncertainty, customers turn to us more as their trusted partner to navigate complexity with the financial strength, stability and expertise they know they can rely on.
“We remain confident in achieving the targets we set out in February 2026.”
Banks across the sector have booked charges because of a worsening economic outlook as the Iran war has led to downgrades for the UK, with major players such as Lloyds Banking Group increasing credit charges because of a more cautious outlook.
HSBC said it continues to slash costs across the group and is set to meet its target for 1.5 billion dollars (£1.1 billion) in annual savings by June, which is six months planned.
It has trimmed 1.4 billion dollars in costs (£1.03 billion) to date under the programme.
Chris Beauchamp, chief market analyst at investing and trading platform IG, said: “HSBC’s results always bring more of an international flavour than its UK peers.
“Unfortunately that means the Hormuz crisis looms large in the results, casting a shadow over an otherwise solid set of numbers.
“The theme is grimly familiar to investors; were it not for the crisis, earnings outlooks would be much rosier.
“The warnings around the economic impact will only continue to grow the longer the situation remains unresolved.”
