HSBC Shares Slide Nearly 7% as Revenue Misses and Wealth Stalls, Despite a 32% Jump in Profit and a $1 Billion Buyback

HSBC delivered higher profits and more money for shareholders, but it was not enough. Europe's largest bank by assets saw its shares fall almost 7% after its third-quarter revenue fell short of expectations and its fast-growing wealth business stalled.

The London-headquartered, Asia-focused lender reported pre-tax profit of about $9.6 billion for the July-September quarter, up 32% from a year earlier, according to Investinglive and Reuters reports on Tuesday, October 27. Excluding notable items, pre-tax profit rose about 10% to roughly $10 billion. The headline increase was helped by the absence of legal provisions that weighed on results a year earlier.

HSBC also announced a new share buyback of up to $1 billion.

But revenue of about $18.6 billion fell below analysts' expectations of roughly $19.1 billion, and adjusted earnings per share of $2.10 missed the consensus forecast of $2.22.

The shares fell almost 7% on Tuesday, touching a six-month low, and dragged down Europe's banking index, which fell 1.1%.

Wealth hits a pause

A key disappointment was HSBC's wealth business, which has been a central part of the bank's growth strategy. Wealth revenue was flat at about $2.7 billion, after growth of 15% and 23% in the first two quarters of the year.

HSBC has been investing heavily in wealth management in Asia, targeting affluent and high-net-worth clients in Hong Kong, mainland China, Singapore, India and the Middle East. Net new money in Asia was about $38 billion in the quarter, suggesting that clients continue to bring assets to the bank, but revenue growth did not keep pace.

Wealth revenue can be affected by market conditions, client trading activity and demand for investment products, all of which can fluctuate from quarter to quarter.

Interest income and credit

Net interest income, the difference between what HSBC earns on loans and pays on deposits, rose 6% to about $9.3 billion, slightly below expectations. The net interest margin was steady at 1.57%.

Credit quality improved. Expected credit losses fell 17% to about $800 million, indicating that the bank's borrowers remain in relatively good health.

Guidance held, not raised

HSBC reaffirmed its guidance rather than raising it, which may have contributed to the share price reaction. The bank expects banking net interest income of at least $46 billion for 2026 and a return on tangible equity of at least 17% for 2026 to 2028.

Chief financial officer Pam Kaur acknowledged that the market sometimes expects guidance or targets to be lifted, according to Investinglive.

Capital position

HSBC's common equity tier 1 ratio, a key measure of financial strength, eased to 13.9%. The implementation of new Basel 3.1 capital rules is expected to add 40 to 50 basis points to capital requirements from January 2027. HSBC targets a CET1 ratio of 14% to 14.5%.

The new buyback of up to $1 billion continues HSBC's programme of returning capital to shareholders, though some investors may have hoped for a larger amount.

HSBC's strategy

Under chief executive Georges Elhedery, who took over in 2024, HSBC has been restructuring to simplify its organisation, reduce costs and focus on its strengths in Asia and the Middle East, as well as in international trade and wealth management. The bank has exited some businesses in Europe and North America.

The strategy aims to make HSBC more efficient and more focused on growth markets, but it depends on sustained growth in areas such as wealth management, which makes the quarter's flat wealth revenue particularly notable.

European banks under pressure

HSBC's results weighed on European bank stocks more broadly. The STOXX 600 index slipped 0.1% in morning trading, while the FTSE 100 fell 0.8%. Other European earnings were more positive, including Novartis, which raised its profit outlook.

European banks have enjoyed a strong run, helped by higher interest rates that boosted lending margins. Investors are now watching for signs that earnings growth may slow.

What it means for India

HSBC is one of the largest foreign banks in India, with a significant presence in corporate banking, trade finance and wealth management. India is a key market for HSBC's strategy to serve affluent clients and multinational companies operating across Asia and the Middle East.

The bank has expanded its wealth management operations in India, targeting the country's growing number of affluent individuals, and serves Indian companies expanding abroad as well as global companies investing in India.

Asia at the centre

HSBC earns most of its profit in Asia, particularly Hong Kong, where it is the largest bank, and mainland China, Singapore and India. The bank's strategy has increasingly focused on Asian wealth, given the rapid growth in the number of wealthy individuals in the region. Net new money of about $38 billion in Asia during the quarter suggests that clients continue to entrust assets to HSBC, even if revenue growth slowed.

Hong Kong's economy and property market have faced challenges, and commercial real estate exposure has been a concern for banks operating there. HSBC's lower expected credit losses in the quarter suggest that these risks are, for now, under control.

The buyback debate

HSBC has been one of the most generous European banks in returning capital through dividends and buybacks. The $1 billion buyback announced with the third-quarter results was smaller than some investors had hoped, contributing to the share price reaction. The bank must balance shareholder returns against capital requirements, including the expected impact of new Basel 3.1 rules from 2027.

The cost discipline story

HSBC's restructuring under Elhedery has included efforts to reduce costs, simplify management layers and exit businesses that do not fit its strategy. Cost discipline is important for maintaining returns as interest rates evolve and revenue growth becomes harder to achieve. Investors will watch whether cost savings can offset slower growth in areas such as wealth management.

What comes next

Investors will watch whether HSBC's wealth business returns to growth in the fourth quarter, and whether the bank can deliver on its return targets as interest rates evolve. The impact of new capital rules and the pace of buybacks will also be important for shareholders. The bank's next update will come with its full-year results in February, when investors will expect clearer guidance on wealth revenue, costs and capital returns for 2027. Hong Kong's economy will also remain a key factor.