Georges Elhedery, Group CEO, said:
“HSBC is becoming the stronger bank we set out to build. We are executing our strategic priorities with pace, precision and discipline. This is allowing our four businesses to focus on their core strengths, grow, work together more effectively and deepen customer relationships. The result is a bank capable of achieving more.”
Financial performance in 1H26
- Profit before tax increased by $3.7bn or 23% to $19.5bn compared with 1H25. The increase primarily reflected a year-on-year net favourable impact of $2.2bn from notable items. The increase also reflected growth in banking net interest income (‘banking NII’) and higher fee and other income, primarily in Wealth and Wholesale Transaction Banking (‘WTB’). This was partly offset by higher expected credit losses and other credit impairment charges (‘ECL’), and a planned increase in operating expenses. Profit after tax of $15.3bn was $2.9bn or 23% higher compared with 1H25.
- In 1H26, notable items included disposal losses of $0.3bn recognised on classification to held for sale associated with the planned sale of our business in Malta, restructuring costs associated with our organisational simplification of $0.3bn, and losses of $0.2bn from the recycling of foreign currency translation reserves following the completion of the sale of our UK life insurance business. In 1H25, notable items included dilution and impairment losses of $2.1bn related to our associate Bank of Communications Co., Limited (‘BoCom’), and restructuring costs associated with our organisational simplification of $0.6bn.
- Constant currency profit before tax excluding notable items increased by $1.1bn to $20.4bn compared with 1H25.
- Revenue increased by $3.6bn or 11% to $37.7bn compared with 1H25, including a year-on-year net favourable impact of notable items of $0.8bn and the favourable impact of foreign currency translation differences of $0.7bn. The remaining increase reflected higher banking NII, and strong growth in Wealth fee and other income in our International Wealth and Premier Banking (‘IWPB‘) and Hong Kong business segments, supported by higher customer activity. The increase also included a one-off property asset disposal gain of $0.2bn. Constant currency revenue excluding notable items rose by $2.0bn to $38.2bn compared with 1H25.
- Net interest income (‘NII’) increased by $1.4bn compared with 1H25, primarily driven by deposit balance growth and the benefit of reinvestment of our structural hedge at higher yields. There was also a favourable impact from foreign currency translation differences of $0.4bn, partly offset by the impact of an adverse $0.1bn one-off item. The impact of lower market interest rates on the funding deployed to the trading book was broadly offset by higher trading balances. Banking NII, which excludes the funding costs associated with the trading book and insurance NII, increased by $1.6bn to $22.9bn.
- Net interest margin (‘NIM’) of 1.61% was 4 basis points (‘bps‘) higher compared with 1H25, mainly due to the impact from foreign currency translation differences and the benefit of our structural hedge, partly offset by lower market interest rates.
- ECL of $2.4bn were $0.4bn higher than in 1H25. The 1H26 charge primarily reflected stage 3 charges on wholesale exposures, including a $0.4bn fraud-related, secondary, securitisation exposure with a financial sponsor in the UK in our Corporate and Institutional Banking (‘CIB‘) business, and $0.2bn related to the Hong Kong commercial real estate (‘CRE’) sector. 1H26 also included allowances to reflect uncertainty due to the ongoing conflict in the Middle East. ECL in 1H25 included charges related to the Hong Kong CRE sector of $0.5bn, as well as allowance increases relating to geopolitical tensions and higher trade tariffs.
- Operating expenses of $17.4bn were $0.4bn or 2% higher than in 1H25, including an adverse impact from foreign currency translation differences of $0.4bn. The increase was driven by higher planned spend and investment in technology, and the impact of inflation. These increases were partly mitigated by cost reductions from our organisational simplification and a year-on-year favourable impact from notable items.
- Target basis operating expenses were $0.4bn or 2% higher than in 1H25, including the impact of inflation and higher planned spend and investment in technology, partly offset by cost reductions from our organisational simplification.
- Customer lending balances increased by $34bn compared with 31 December 2025, including adverse foreign currency translation differences of $6bn. On a constant currency basis, lending balances increased by $40bn, reflecting growth across all our business segments, particularly in our main entity in Hong Kong. This was partly offset by the classification to held for sale of loans from the planned sale of our business in Malta.
- Customer accounts increased by $41bn compared with 31 December 2025, including adverse foreign currency translation differences of $15bn. On a constant currency basis, customer accounts increased by $56bn, primarily reflecting growth in our CIB business, partly offset by the classification to held for sale of deposits from the planned sale of our business in Malta and our retail banking business in Indonesia.
- Common equity tier 1 (‘CET1’) capital ratio of 14.1% decreased by 0.8 percentage points compared with 31 December 2025, reflecting the impact of the privatisation of Hang Seng Bank Limited (‘Hang Seng Bank’), dividends and an increase in risk-weighted assets (‘RWAs‘), partly offset by regulatory profit.
- The Board has approved a second interim dividend of $0.10 per share. We also intend to initiate a share buy-back of up to $1bn, which we expect to complete by our third quarter 2026 results announcement.
Financial performance in 2Q26
- Profit before tax increased by $3.8bn or 60% to $10.1bn compared with 2Q25, primarily reflecting a net favourable impact from notable items of $2.6bn. The increase also reflected growth in banking NII, and higher fee and other income primarily in Wealth and WTB. Profit after tax increased by $3.1bn or 63% to $7.9bn compared with 2Q25.
- In 2Q26, notable items included restructuring costs associated with our organisational simplification of $0.2bn. In 2Q25, notable items included dilution and impairment losses of $2.1bn related to our associate BoCom, and restructuring costs associated with our organisational simplification of $0.5bn.
- Revenue increased by $2.6bn to $19.1bn compared with 2Q25, including a year-on-year net favourable impact of $1.3bn from notable items. The increase also reflected a rise in banking NII, and strong growth in Wealth fee and other income in our IWPB and Hong Kong business segments, supported by higher customer activity. Revenue grew in Debt and Equity Markets and WTB in our CIB business. Constant currency revenue excluding notable items rose by $1.3bn to $19.0bn.
- ECL of $1.1bn were stable compared with 2Q25. The charge in 2Q26 primarily comprised stage 3 charges, including $0.2bn related to the Hong Kong CRE sector. The ECL charge in 2Q25 included charges of $0.4bn related to the Hong Kong CRE sector.
- Operating expenses of $8.7bn were $0.2bn or 2% lower compared with 2Q25, reflecting lower restructuring costs together with the resultant cost reduction benefits from our organisational simplification, and the phasing of performance-related pay accrual relative to 2Q25. These reductions were partly offset by higher planned spend and investment in technology, the impact of inflation and an adverse impact from foreign currency translation differences of $0.1bn.
- Customer lending increased by $20bn compared with 1Q26 on a reported basis, reflecting growth across all segments.
- Customer accounts increased by $46bn compared with 1Q26 on a reported basis, primarily reflecting growth in our CIB business, notably in Hong Kong, partly offset by the classification of deposits from the planned sale of our retail banking business in Indonesia to held for sale.
Outlook
Group financial targets
- We remain confident in achieving the targets we set out in February 2026, including a return on average tangible equity (‘RoTE’) of 17% or better for 2026, 2027 and 2028, excluding notable items.
- We continue to target year-on-year growth in revenue from 2026 to 2028, rising to 5% growth in 2028 compared with 2027, excluding notable items and on a constant currency basis.
- We maintain our dividend payout ratio target basis of 50% in 2026, 2027 and 2028. Our target basis payout ratio is calculated as a percentage of earnings per share (‘EPS’) excluding material notable items and related impacts.
In respect of 2026
- We now expect banking NII of at least $46bn in 2026, reflecting a continued favourable interest rate outlook, while recognising the outlook remains volatile and uncertain. We had previously provided banking NII guidance of around $46bn for 2026.
- We continue to expect an ECL charge as a percentage of average gross customer loans to be around 45bps (including held for sale loan balances) for 2026, reflecting ongoing uncertainty in the outlook. Over the medium term, we retain our planning range of 30-40bps.
- The Group remains on track to deliver year-on-year growth in operating expenses of approximately 1% in 2026 on a target basis. Should strong business performance continue, we may consider additional performance-related pay which would increase 2026 target basis cost growth modestly. Our target basis operating expenses measure excludes notable items and includes the impact of simplification-related saves associated with our announced strategic reorganisation.
- We intend to continue to manage the CET1 capital ratio within our medium-term target range of 14% to 14.5%.
See also:
HSBC Group CEO Georges Elhedery named Euromoney’s Banker of the Year | Disruption Banking
HSBC Accelerates AI Push as CEO Urges Staff to Adapt | Disruption Banking
