TLDR
- HSBC reported $9.5B Q1 pre-tax profit, beating $7.8B expectations despite falling 25% year over year.
- Revenue fell 15% to $17.65B due to lower net interest income and operating income.
- U.S. tariffs raise risks of weaker loan demand and $500M in potential credit losses.
- Asian wealth management grew strongly, adding $22B in new invested assets.
- HSBC stock is up 50% over the past year and currently trades at $57.65.
HSBC Holdings (NYSE: HSBC) posted stronger-than-expected earnings for Q1 2025, but flagged macroeconomic risks that could threaten credit quality. The bank reported a pre-tax profit of $9.5 billion, topping analyst expectations of $7.8 billion. Shares rose over 2% during Tuesday trading to $57.65 as of writing.
The figure, though strong, marked a 25% decline from last year’s $12.7 billion, mainly due to one-off gains from asset sales in Canada and Argentina in the prior quarter. Adjusted performance showed lower revenue and rising credit losses.
Revenue Weakness and Rising Credit Risks
Total revenue fell 15% year over year to $17.65 billion, dragged down by lower net interest income and weak operating income. Expected credit losses (ECL) climbed 21.7% to $876 million, pointing to growing concern over loan quality.
CEO Georges Elhedery warned that newly announced U.S. tariffs could disrupt cross-border trade, particularly between the U.S. and China. He noted that the Mexico division, a critical trade node, may face disruptions. In a downside scenario, HSBC anticipates $500 million in extra credit losses and a minor impact on total revenue.
Segment Performance Mixed
While the headline numbers showed strength, business-line performance varied:
- Hong Kong delivered a $2.54 billion pre-tax profit, up 9.8% year over year.
- UK operations saw profits fall 6.3% to $1.55 billion, affected by rising ECL and costs.
- Corporate and Institutional Banking rose 10.9% to $3.52 billion on stronger revenue.
- Wealth and Premier Banking slipped slightly to $1.19 billion, hurt by higher credit costs.
- Corporate Centre fell sharply to $682 million from $4.2 billion, due to prior-year asset sale gains.
One bright spot was HSBC’s wealth management division in Asia, which saw $22 billion in net new invested assets—$16 billion from Asia alone—and a 29% increase in new customers in Hong Kong.
Capital and Shareholder Returns Remain Strong
Despite macro concerns, HSBC continues to reward shareholders. It declared a forward dividend of $7.20, yielding 12.78%, one of the highest among global banks. The company also announced a $3 billion share buyback, highlighting its strong capital base. The common equity tier 1 (CET1) ratio stood at 14.7%, down slightly from last year.
Stock Outperformance Continues
HSBC shares are up 20.09% YTD and have delivered a staggering 50.24% return over the past year—well ahead of the FTSE 100’s 3.88% one-year gain. Its five-year return of nearly 194% dwarfs the index’s 38.4% return.
Conclusion
HSBC’s Q1 beat shows resilience in a challenging environment, but warning signs about credit demand and tariffs could limit future growth. Still, its global scale, robust dividend, and share buyback program make it a standout in the banking sector.
