HSBC Q3 Pre-Tax Profit Rises 32 Percent to 9.6 Billion Dollars on Lower Legal Costs
HSBC Holdings reported profit before tax of 9.6 billion dollars for the third quarter of 2026, up 2.3 billion dollars or 32 percent on a year earlier. Most of the rise came from a single base effect: 1.4 billion dollars of legal provisions booked in the third quarter of 2025 did not recur. Stripping out such notable items and holding currencies constant, profit before tax rose 10 percent to 10.0 billion dollars.
The bank approved a third interim dividend of 0.10 dollars a share and said it intends to start a new share buyback of up to 1 billion dollars. Its common equity tier 1 (CET1) ratio eased to 13.9 percent. Group Chief Executive Georges Elhedery spoke of “creating greater capacity to invest, grow and deliver strong returns for our shareholders”.
The third quarter: revenue up, costs down on the year
Revenue rose 0.8 billion dollars to 18.6 billion dollars. Banking net interest income, the measure HSBC guides on, climbed 0.6 billion dollars to 11.7 billion dollars. Reported net interest income rose 6 percent to 9.3 billion dollars on deposit growth and the reinvestment of its structural hedge at higher yields. The net interest margin was stable at 1.57 percent. Fee and other income also grew in transaction banking, in debt and equity markets and in wealth. Valuation losses in the Corporate Centre, and one-off favourable insurance items in the 2025 quarter that did not repeat, partly offset the revenue gain.
Operating expenses fell 1.3 billion dollars, or 12 percent, to 8.8 billion dollars, again because the legal provisions sat in the base. On the target basis the bank uses for guidance, costs rose 1.4 percent. Expected credit losses (ECL) fell 17 percent to 0.8 billion dollars, helped by 0.1 billion dollars less in stage 3 charges on Hong Kong commercial real estate. Profit after tax rose 38 percent to 7.6 billion dollars.
Annualised return on average tangible equity (RoTE) was 17.7 percent, up from 12.3 percent; excluding notable items it was 18.2 percent, 1.6 points higher.
In the bank’s chart of revenue by business, excluding notable items, Corporate and Institutional Banking was the largest at 7.6 billion dollars, or 40.6 percent of the 18.7 billion dollar total on our calculation. Hong Kong contributed 4.1 billion dollars, International Wealth and Premier Banking 3.8 billion and the UK 3.4 billion, with the Corporate Centre at minus 0.2 billion. The chart prints no period, but its parts add to 18.7 billion dollars, the quarter’s constant currency revenue excluding notable items, so on our reading it covers the third quarter.
HSBC third quarter 2026 against a year earlier
| Measure | 3Q26 | Change on 3Q25 |
|---|---|---|
| Profit before tax | $9.6bn | +$2.3bn (+32%) |
| Revenue | $18.6bn | +$0.8bn |
| Banking net interest income | $11.7bn | +$0.6bn |
| Expected credit losses | $0.8bn | -$0.2bn (-17%) |
| Operating expenses | $8.8bn | -$1.3bn (-12%) |
| Profit after tax | $7.6bn | +$2.1bn (+38%) |
| Annualised RoTE | 17.7% | from 12.3% |
Reported figures and changes as printed in the bank’s 3Q 2026 earnings release of 27 October 2026.
Against the second quarter
Set against the second quarter, the picture is flatter. On our calculation from the two releases, profit before tax and revenue were each 0.5 billion dollars lower than in the second quarter. Credit losses were 0.3 billion dollars lighter on our calculation, and costs 0.1 billion dollars heavier.
The balance sheet kept growing. Customer lending rose 7.8 billion dollars from the end of June, or 6.7 billion dollars at constant currency. The bank tied that growth mainly to customers taking part in India’s Foreign Currency Non-Resident Deposit scheme and to growth in the UK and Hong Kong, partly offset by loans reclassified for sale with the exit from retail banking in Australia. Customer accounts rose 9.1 billion dollars, or 6.5 billion dollars at constant currency on continued deposit inflows in Hong Kong. Customer deposits stood at 1.8 trillion dollars. HSBC said all four of its businesses grew deposits and delivered annualised RoTE of 17 percent or more, excluding notable items.
HSBC quarter on quarter, 2026
| Measure | 2Q26 | 3Q26 |
|---|---|---|
| Profit before tax | $10.1bn | $9.6bn |
| Revenue | $19.1bn | $18.6bn |
| Expected credit losses | $1.1bn | $0.8bn |
| Operating expenses | $8.7bn | $8.8bn |
| Profit after tax | $7.9bn | $7.6bn |
| CET1 ratio, quarter end | 14.1% | 13.9% |
Second-quarter figures from the bank’s interim results release of 4 August 2026; third-quarter figures from the 27 October 2026 release.
Nine months: profit up 26 percent
For the first nine months, profit before tax rose 6.0 billion dollars, or 26 percent, to 29.2 billion dollars. Notable items accounted for a net 3.7 billion dollars of the gain. The 2025 period carried 2.1 billion dollars of dilution and impairment losses on the bank’s stake in Bank of Communications and the 1.4 billion dollars of legal provisions. Restructuring costs were 0.3 billion dollars lower. The 2026 period booked a 0.3 billion dollar loss on the planned sale of the Malta business. Excluding notable items at constant currency, nine-month profit before tax rose 2.0 billion dollars to 30.4 billion dollars.
Revenue rose 9 percent to 56.4 billion dollars, and banking net interest income gained 2.2 billion dollars to 34.6 billion. The margin widened 3 basis points to 1.60 percent. Credit losses rose 0.2 billion dollars to 3.2 billion, including a 0.5 billion dollar charge on a fraud-related securitisation exposure to a financial sponsor in the UK, 0.3 billion dollars on Hong Kong commercial real estate and allowances for uncertainty tied to the conflict in the Middle East. Costs fell 3 percent to 26.2 billion dollars, but rose 2.0 percent on the target basis. Profit after tax rose 28 percent to 22.9 billion dollars.
On our calculation, the third quarter supplied 32.9 percent of nine-month pre-tax profit. Annualised RoTE was 18.0 percent, or 18.8 percent excluding notable items, 1.1 points above the same period of 2025.
HSBC nine months to September 2026
| Measure | 9M26 | Change on 9M25 |
|---|---|---|
| Profit before tax | $29.2bn | +$6.0bn (+26%) |
| Revenue | $56.4bn | +$4.5bn (+9%) |
| Banking net interest income | $34.6bn | +$2.2bn |
| Expected credit losses | $3.2bn | +$0.2bn |
| Operating expenses | $26.2bn | -$0.9bn (-3%) |
| Profit after tax | $22.9bn | +$4.9bn (+28%) |
Reported figures and changes as printed in the bank’s 3Q 2026 earnings release.
Capital, payouts and the 2026 guidance
The CET1 ratio fell 0.2 points from 30 June to 13.9 percent. The bank tied the decline to higher risk-weighted assets, a lower fair value on some debt holdings as yields rose and the buyback announced in August, partly offset by profits net of dividends. That leaves the ratio 0.1 point below the 14 to 14.5 percent range HSBC targets, on our calculation. The bank is still assessing the final Basel 3.1 standards. Based on its latest modelling, it expects a benefit to the ratio of an estimated 40 to 50 basis points on 1 January 2027.
The bank’s dividend timetable dates the third interim dividend of 0.10 dollars a share 17 December, and puts the year-to-date total for 2026 at 0.30 dollars. The 1 billion dollar buyback announced at the interim results was completed on 28 September, and the bank expects the new one of up to 1 billion dollars to finish by the full-year results, which the financial calendar sets for 23 February 2027.
The bank kept its 2026 guidance. It still expects banking net interest income of at least 46 billion dollars this year. Nine months have delivered 34.6 billion dollars, 75.2 percent of that floor on our calculation. The fourth quarter therefore needs at least 11.4 billion dollars on our calculation, against 11.7 billion in the third. The bank expects an ECL charge of an estimated 45 basis points of average gross customer loans for 2026, and target-basis cost growth of an estimated 1 percent. Nine-month target-basis costs were 2.0 percent higher, so on our reading cost growth must slow in the fourth quarter for that figure to hold; the bank added that extra performance-related pay could lift 2026 cost growth modestly.
HSBC 2026 guidance and the nine-month position
| Item | Guidance | Latest |
|---|---|---|
| Banking net interest income | At least $46bn in 2026 | $34.6bn in 9M26 |
| Target-basis cost growth | An estimated 1% in 2026 | +2.0% in 9M26 |
| RoTE excluding notable items | 17% or better, 2026 to 2028 | 18.8% in 9M26 |
| CET1 ratio | 14% to 14.5% | 13.9% at 30 September |
Guidance as stated in the bank’s 3Q 2026 earnings release; the ECL guidance of an estimated 45 basis points includes loan balances classified for sale.
Why it matters: The 32 percent rise in reported profit is mostly a base effect from last year’s legal charges. The underlying numbers are steadier. Excluding notable items at constant currency, profit rose 10 percent and revenue 5 percent. Banking net interest income has reached 75.2 percent of its full-year floor after nine months, on our calculation. Capital is the point to watch. The CET1 ratio sits 0.1 point under the target range on our calculation as a new buyback is planned. The bank expects the final Basel 3.1 standards to bring a benefit of an estimated 40 to 50 basis points on 1 January 2027.
Outlook: HSBC said it remains confident of reaching the targets it set in February 2026, including a RoTE of 17 percent or better, excluding notable items, for 2026, 2027 and 2028. It still targets revenue growth rising to 5 percent in 2028, excluding notable items at constant currency, and keeps a 50 percent dividend payout ratio on its target basis. The full-year results on 23 February 2027 will show whether banking net interest income clears 46 billion dollars, whether cost growth lands near the guided level and where the CET1 ratio stands at the end of 2026.
Sources: HSBC, The Edge.
