HSBC shares tumbled more than 6% on Tuesday after the banking giant reported third-quarter revenue below market expectations, overshadowing a 32% jump in pretax profit and its announcement of a fresh $1 billion share buyback.
Europe's largest bank reported pretax profit of $9.63 billion for the July-September quarter, broadly in line with analysts' estimates of $9.69 billion. Revenue increased 5% year-on-year to $18.6 billion, but fell short of the $18.93 billion expected by analysts, according to estimates cited by CNBC.
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The earnings report triggered a sell-off in the bank's shares. HSBC's Hong Kong-listed stock fell around 3% following the results, while its London-listed shares dropped approximately 6.5% in early European trading, according to CNBC and Reuters. The decline put the London-listed stock on course for its steepest single-day fall since April 3, 2025.
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Despite the market reaction, HSBC announced a share buyback of up to $1 billion, matching the amount announced for the previous quarter. The bank also declared an interim dividend of 10 cents per share.
The revenue shortfall was partly attributed to slower growth in HSBC's wealth management business, which has been an important contributor to the bank's recent performance.
Revenue from the wealth division remained flat at $2.7 billion during the quarter. This marked a slowdown from year-on-year growth of 15% in the first quarter and 23% in the second quarter, Reuters reported.
Analysts at Citi and Jefferies described the results as somewhat underwhelming, although they suggested that underlying trends in wealth balances and private banking remained healthier than the headline revenue figures indicated.
Citi analysts also highlighted the mixed nature of the results, pointing to the revenue miss alongside HSBC's strong profitability. The bank reported a year-to-date return on tangible equity of 18.8%, above its medium-term guidance of around 17%.
HSBC's higher quarterly profit was partly driven by the absence of significant legal provisions recorded a year earlier.
The bank had booked $1.4 billion in legal provisions in the corresponding period last year, making the year-on-year comparison more favourable. Operating expenses declined 12% to $8.8 billion, largely reflecting the non-recurrence of those charges.
Excluding notable items, however, expenses increased amid inflationary pressures and higher technology spending.
Expected credit losses fell 17% year-on-year to $800 million. Reuters attributed the decline partly to lower charges linked to Hong Kong's property sector and the bank's wealth businesses in the UK and Mexico.
Net interest income rose to $9.3 billion, supported by deposit growth and the reinvestment of HSBC's structural hedge at higher yields.
Despite the revenue miss and the market reaction, HSBC retained its key financial targets.
The bank expects banking net interest income of at least $46 billion in 2026. It also reiterated its target of achieving a return on average tangible equity of at least 17% annually from 2026 through 2028, excluding notable items.
HSBC expects revenue to grow each year through 2028 and is targeting 5% growth in 2028 compared with 2027, excluding notable items and on a constant-currency basis.
The lender remains on track to deliver operating expense growth of around 1% in 2026 on a target basis. However, stronger business performance could lead to higher performance-related pay and modestly greater cost growth.
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The bank said it had completed the $1 billion share buyback announced alongside its interim results and expects to complete another $1 billion programme before publishing its full-year 2026 results.
The results come as Britain's banks face the prospect of higher taxes, with industry executives lobbying against additional levies ahead of the government's upcoming budget. HSBC's strong profitability has also intensified scrutiny of the sector's contribution to public finances.
For investors, the latest results present a mixed picture: HSBC continues to deliver strong profits and shareholder returns, but the revenue shortfall and slowdown in wealth management have raised questions about whether its performance can meet elevated market expectations.
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