HSBC’s Profit Hit by $1.3bn Loan Loss Provision In Q1

Profit at global banking giant HSBC came under pressure in the first quarter of the year, weighed down by a sharp rise in loan loss provisions and a fraud-related charge linked to its exposure in the private credit market.
The bank headquartered in London reported a four per cent decline in profit to $9.4 billion for the period under review, down from the corresponding period in 2025, despite a 6 per cent increase in revenue to $18.6 billion.
The dip in earnings was largely driven by a spike in expected credit losses, which climbed to $1.3 billion, reflecting growing concerns over souring loans. Of the total provision, about $300 million was attributed to the ripple effects of the ongoing conflict in the Middle East, particularly the US-Israel war involving Iran.
Further weighing on performance was a $400 million charge tied to what the bank described as a “fraud-related, secondary securitisation exposure” within its investment banking arm. The exposure stemmed from loans extended to a private equity group with underlying links to the troubled private credit sector.
Chief financial officer, Pam Kaur, explained that the charge was connected to indirect exposure to a failed mortgage lender through structured credit arrangements, although the bank declined to name the entities involved.
The development comes amid heightened scrutiny of the private credit market, following the collapse of Mortgage Financial Solutions (MFS), which has triggered regulatory investigations in the United Kingdom and forced other lenders to book losses.
Despite the setback, HSBC maintained that its overall exposure to private credit remains limited at approximately $6 billion, a fraction of its roughly $1 trillion balance sheet. Kaur described the incident as isolated, noting that the bank has intensified due diligence across high-risk segments in response.
On the geopolitical front, the bank moved to reassure investors that its credit portfolio remains resilient, even as it continues to monitor developments in the Middle East. While some clients have increased borrowing amid uncertainty, the lender said deal activity has remained largely stable.
“In times of stress, we typically take a cautious stance,” Kaur said, adding that provisions could be reversed if conditions improve, similar to trends observed after previous global disruptions.
However, investor sentiment appeared cautious, with HSBC shares declining by more than 5 per cent, placing the stock among the worst performers on the FTSE 100 during the trading session.
Looking ahead, the bank signalled its intention to sustain investments in its Middle East wealth management operations, expressing optimism that regional stability would support business continuity in the coming months.