UBS: HSBC Holdings (00005) third quarter results slightly weaker, market focus on recent profit risks.

UBS releases research report stating that HSBC HOLDINGS (00005) reported first-quarter operating profit before provisions and pre-tax profit below market expectations by 1% and 2% respectively, with revenue growth being offset by costs and impairments. Excluding special items and one-time gains from property sales (USD 200 million), pre-tax profit was 2% below market consensus. HSBC's first-quarter revenue was 1% above consensus: net interest income from banking was in line with expectations, while expenses and other income were 4% higher than expected. Operating expenses were 4% higher than expected. The bank noted that HSBC's first-quarter provisions were 9% higher than market consensus, with a loan to ratio of 53 basis points; there was a total impairment of USD 1.3 billion for the quarter, with USD 300 million related to the Middle East conflict and USD 400 million related to "fraud-related sub-prime securitization exposures" with a UK financial sponsor, speculated to be the same incident as Barclays. The core tier 1 capital ratio of 14% was in line with consensus, increasing by 20 basis points for the quarter (after Hong Kong privatization adjustments in the fourth quarter of last year, it was 13.8%, completed in the first quarter). Dividends maintained at USD 0.1 per share. The bank noted that HSBC updated its guidance for the 2026 fiscal year to a net interest income of approximately GBP 46 billion (previously at least USD 45 billion, market consensus of USD 458 billion) and a CET1 ratio target range of 14% to 14.5% (market consensus of 14.2%). UBS indicated that the focus of the HSBC performance conference call included net interest income, wealth management, and recent profit risks: the impact of Middle Eastern energy, particularly important in Asia. The company provided energy stress test results on page 17 of the briefing: pre-tax profit for 2026 may decline by a high single-digit percentage.