HSBC's first-quarter profits were broadly flat as a sharp and unexpected jump in credit losses overshadowed otherwise solid trading. A $400m fraud-related loss in the UK drove a marked rise in bad loan charges, pushing profits just below expectations.
The theme of credit losses has dominated HSBC's quarter, according to Will Howlett, financials analyst at Quilter Cheviot. He noted that even as the rest of the loan book remains stable, the fraud loss has put fresh focus on risks within more complex lending.
Revenues grew 4%, slightly ahead of expectations, helped mainly by fees rather than interest income. Wealth management continued to perform well, though growth has slowed from last year's pace. Higher income was absorbed by rising costs and credit charges.
The geopolitical backdrop also looms large. Howlett cautioned that the Hormuz crisis casts a shadow over an otherwise solid set of numbers, given HSBC's international exposure compared to its UK peers.
Investors now face a grimly familiar picture of earnings stability undermined by unforeseen credit events and geopolitical risks. The bank's ability to generate revenue growth may be tested if these headwinds persist.