HSBC Q3 pretax profit jumps 32% but shares tumble over 6% as revenue misses estimates

HSBC reported on Tuesday, October 27, that third-quarter profit before tax rose $2.3 billion, or 32%, to $9.6 billion from a year earlier, according to its earnings release. The bank approved a third interim dividend of $0.10 per share and said it intends to buy back up to $1 billion of shares by its full-year results, after completing the $1 billion buyback announced in August. The shares still fell more than 6%, dropping as much as 7% to 1,263.6p in London, Proactive reported, and the slide pulled European bank stocks lower.

The headline growth flattered the quarter. HSBC said the jump was primarily due to a $1.4 billion favourable impact from the non-recurrence of legal provisions booked in the third quarter of 2025. On a constant currency basis excluding notable items, pretax profit rose $0.9 billion to $10.0 billion.

Against HSBC's company-compiled consensus of 17 analysts, revenue of $18.62 billion missed the $18.93 billion forecast, and pretax profit of $9.63 billion came in just under the $9.70 billion estimate. Wealth fee income was $2.69 billion versus a $2.81 billion forecast, essentially flat year on year after 15% and 23% growth in the first two quarters. Earnings per share of $0.41 were close to the $0.42 consensus. Reports of a $1.79 per-share EPS miss compare per-share earnings with a per-ADR estimate (one ADR equals five ordinary shares) and do not reflect a real shortfall.

Returns stayed above target: annualised return on tangible equity excluding notable items was 18.2% for the quarter and 18.8% for the first nine months. HSBC kept its outlook unchanged, including a RoTE of 17% or better through 2028 and banking net interest income of at least $46 billion in 2026. The common equity tier 1 ratio fell to 13.9%, below the 14% to 14.5% target range.

Investors may watch whether wealth growth recovers in the fourth quarter and whether the unchanged guidance proves conservative. Chief financial officer Pam Kaur noted on the call that "there is sometimes a market expectation that we upgrade guidance or targets". The pace of buybacks may also depend on the capital ratio returning to its target range.