HSBC profit jumps 32% in third quarter as bank presses on with overhaul

HSBC said Tuesday that its profit before tax rose 32 percent in the third quarter, to $9.6 billion, as the bank benefited from the absence of a large legal provision it had booked a year earlier and continued to cut costs under a multi-year overhaul. The London-based lender also said it would launch a further share buyback of up to $1 billion, days after completing an identical program, even as its capital buffer thinned slightly ahead of new regulatory rules due to take effect in 2027.

The results, filed with the U.S. Securities and Exchange Commission and published in HSBC's own earnings release, cover a quarter in which the bank's underlying business grew only modestly while its bottom line was flattered by one-off items. Profit after tax rose 38 percent to $7.6 billion, and basic earnings per share rose to 41 cents from 28 cents a year earlier. Revenue, which HSBC calls net operating income, increased 5 percent to $18.6 billion.

Where the growth came from

About $1.4 billion of the jump in pre-tax profit reflected the fact that HSBC's third quarter of 2025 had been weighed down by legal provisions that did not recur this year, according to the filing lodged with the SEC as a Form 6-K. Stripping out such notable items, pre-tax profit still rose, to $10.0 billion from $9.1 billion, which HSBC attributed mainly to stronger net interest income and lower charges for bad loans. Net interest income climbed 6 percent to $9.3 billion, and the bank's net interest margin held steady at 1.57 percent. Expected credit losses fell 17 percent to $0.8 billion, as a smaller allowance was needed for commercial real estate exposure.

Annualized return on average tangible equity, a measure watched closely by bank investors, rose to 17.7 percent from 12.3 percent a year earlier, or to 18.2 percent excluding one-off items. Operating expenses fell 12 percent to $8.8 billion, though HSBC said underlying costs on a comparable basis actually rose 1.4 percent, reflecting inflation and continued investment in technology that was only partly offset by savings from its restructuring program.

Chief Executive Georges Elhedery tied the results to the bank's push to pare back its operations and redeploy the savings elsewhere.

"Our performance shows that in a more complex world clients continue to turn to us to navigate uncertainty and seize new opportunities. It also reflects consistent execution of our strategic priorities with pace, precision and discipline."

A bank still being taken apart and rebuilt

The quarter extended a reshaping of HSBC that has been underway since Elhedery became chief executive in 2024. The bank has pledged to deliver roughly $2 billion in annualized cost savings by the end of 2026 through what it calls organizational simplification, up from an original target of $1.5 billion that it said it had already exceeded by mid-year. It has also sold or exited more than a dozen businesses and markets since 2025.

The most significant of those moves was completed in January, when HSBC finished taking Hang Seng Bank private, folding the Hong Kong lender into the HSBC Group as a wholly owned subsidiary and delisting its shares from the Hong Kong exchange. During the third quarter alone, HSBC completed the sale of its operations in Uruguay and announced the sale of its Singapore life-insurance business to Allianz, while in Australia it is winding down its retail business and selling off a portfolio of home and personal loans. Those moves, the bank said, free up capital and management attention for faster-growing areas such as wealth management, where client balances reached $1.6 trillion at the end of September after $105 billion of net new money flowed in during the first nine months of the year, with most of it coming from Asia.

A buyback that undershot some forecasts

HSBC's board approved a third interim dividend of 10 cents a share, unchanged from a year earlier, and confirmed that a $1 billion buyback announced alongside its half-year results had been completed on September 28, with roughly 31.7 million shares repurchased. It said a new buyback of up to $1 billion would begin shortly and run until the bank's full-year results, expected early next year.

The size of that commitment is smaller than some analysts had been penciling in. Goldman Sachs, in an August note that raised its price targets on HSBC's London- and Hong Kong-listed shares and kept a buy rating, had forecast buybacks of $1.5 billion in the third quarter and $2 billion in the fourth. A $1 billion program announced with the bank's half-year results in July had already drawn a mixed reception: the consensus among 17 analysts tracked at the time leaned toward hold rather than buy, with an average price target running slightly below where the shares were then trading, according to a tally of broker ratings published in August. HSBC had paused buybacks for three quarters after announcing the Hang Seng deal in October 2025, in order to preserve capital, and has resumed them in $1 billion increments since the second quarter of this year.

That caution shows up in the bank's capital position. Its common equity tier 1 ratio, the main cushion regulators use to judge a bank's resilience, slipped to 13.9 percent at the end of September from 14.1 percent three months earlier, dipping just below HSBC's own medium-term target range of 14 percent to 14.5 percent. The bank attributed the decline to a rise in risk-weighted assets, a fall in the value of its bond holdings as yields rose, and the completed share buyback, only partly offset by retained profit.

What comes next

HSBC reiterated guidance it first set out in February, targeting a return on tangible equity of 17 percent or better for 2026 through 2028 and banking net interest income of at least $46 billion this year. It also flagged that new global bank-capital rules, known as Basel 3.1, are expected to add roughly 40 to 50 basis points to its capital ratio once they take effect on January 1, 2027, a timeline the Bank of England confirmed earlier this year after a series of delays meant to keep British rules in step with other jurisdictions, including the United States.

For employees, the simplification drive HSBC credited for part of this quarter's cost savings has meant continued restructuring charges, which the bank said totaled $0.3 billion less in the first nine months of this year than in the same period of 2025 as the bulk of the program winds down. For shareholders, the quarter brought a modestly higher dividend stream and the promise of further buybacks, tempered by a central bank-driven capital squeeze on the horizon. HSBC's full-year 2026 results, due early next year, will show whether the bank can keep both the capital ratio and the pace of its shareholder payouts moving in the direction it has promised.