HSBC (HSBC) Q3 2026 Earnings: CET1 Falls Below Target, Buyback Continues

HSBC (HSBC) reported its third-quarter 2026 results in an earnings release on October 27, 2026, and the main change is that its CET1 capital ratio fell below the bank's own target range [1]. The open questions were whether banking net interest income could hold $46bn for the year, whether Asian wealth fees could keep growing after mainland China tightened cross-border investment rules, and how much room credit costs and capital leave for shareholder returns. In the third quarter, banking net interest income held that floor, credit costs ran below guidance, wealth fees were flat year on year, and the common equity tier 1 (CET1) ratio fell to 13.9% while the company still announced a new buyback [2]. The overall view is largely unchanged, but until new capital rules arrive in 2027, shareholder returns depend more on profits outpacing balance sheet growth.

HSBC is an international bank with Hong Kong and the UK as home markets, and it earns most of its profit from the deposit spread: at the end of September it held $1.84tn of customer deposits against $1.03tn of customer loans [3]. The rest of its revenue comes from wealth products and transaction banking services.

HSBC CET1 ratio falls below its 14%-14.5% target range

HSBC's CET1 ratio fell from 14.1% at the end of June to 13.9% at the end of the third quarter, below the company's target range of 14% to 14.5% [2]. According to the company's breakdown, higher risk-weighted assets, a lower fair value of hold-to-collect-and-sell bonds as yields rose, and the buyback reduced the ratio by 0.3, 0.2 and 0.1 percentage points, while profit generation added 0.4 percentage points [4]. Risk-weighted assets rose by $16bn, mainly from sovereign exposures linked to India's foreign currency deposit scheme and from loan growth [5]. The unrealized loss on hold-to-collect-and-sell bonds widened from $2.4bn to $5.0bn [6].

Shareholder returns continued. HSBC completed its previous $1bn buyback on September 28 and announced a new buyback of up to $1bn [1], and it kept the third interim dividend at $0.10 per share [7]. The company estimates Basel 3.1 will lift the CET1 ratio by about 40 to 50 basis points on January 1, 2027, subject to supervisory permissions [8].

Wealth fees flat while client inflows accelerate

Wealth fee income was $2.688bn in the third quarter, flat with the same quarter a year earlier, and disposals reduced it by $124m [9]. The same line had grown 22% year on year in the second quarter [10] and was still up 13% over the first nine months [11]. The company said investment distribution and private banking grew, while insurance declined on disposals and the absence of last year's one-off gains [12]. By business, wealth revenue in International Wealth and Premier Banking fell 2% [13], while the Hong Kong business grew 7% [14].

Client money came in faster. Net new money was $41bn in the third quarter, compared with $25bn in the second quarter, but $24bn of it was deposits and net new invested assets fell to $17bn [15]. Net new money for the first nine months reached $105bn, including $95bn in Asia [16], and invested assets stood at $973bn [17]. The earnings call summary said new mainland rules could temporarily slow client acquisition, and management gave no figures on any outflows [18].

Banking NII holds the $46bn full-year floor

Banking NII was $11.656bn in the quarter, slightly above the second quarter and $607m higher than a year earlier [19]. The company attributed the year-on-year increase to deposit growth and to reinvesting its structural hedge at higher yields [12], and it said the flat result versus the second quarter reflected hedge income offsetting adverse one-off items [20]. Nine-month banking NII reached $34.552bn; the company kept its expectation of at least $46bn for 2026, which about $11.45bn in the fourth quarter would reach [21].

This came with higher deposit costs. Constant currency customer deposits rose by $6.5bn from the end of June [3]: Hong Kong added $20.6bn, mainly in term deposits, while short-term balances in Corporate and Institutional Banking flowed out by $24.2bn as expected [22]. Competition for time deposits in Hong Kong lowered margins [14], the call summary put the time deposit share at 38% [18], and the group net interest margin fell 5 basis points from the second quarter to 1.57% [23].

Credit costs run below full-year guidance

Expected credit losses were $832m in the third quarter, down from $1.052bn in the second quarter [24], equal to 31 basis points annualized and 41 basis points for the first nine months [25]. The company said the year-on-year decline mainly came from about $0.1bn lower stage 3 charges in Hong Kong commercial real estate [1]. Credit-impaired Hong Kong commercial real estate loans, excluding mainland Chinese borrowers, fell from $5.989bn to $5.593bn, but their loan-to-value ratio rose to 83% [26]. The net credit loss charge in that sector was $0.3bn for the first nine months [27]. The company kept its full-year guidance of about 45 basis points [21], and the call summary said management had no concerns about the fourth quarter [18].

Conclusion

HSBC's growth and profit conversion held steady: banking net interest income held its floor, credit costs were low, and the wealth fee pause mainly reflected disposals and a one-off base. Distributable capital tightened for a quarter on balance sheet growth and higher yields; profit generation did not weaken. The next tests are whether the CET1 ratio returns above 14% by year-end, whether the Basel 3.1 benefit arrives as estimated, and whether new wealth money turns into double-digit fee growth.

Sources

[1] HSBC 3Q26 earnings release - Financial performance in 3Q26 [2] HSBC 3Q26 earnings release - Key financial metrics - capital [3] HSBC 3Q26 earnings release - Key financial metrics - balance sheet [4] HSBC 3Q26 earnings release - Capital and liquidity risk - capital [5] HSBC 3Q26 earnings release - Risk-weighted assets [6] HSBC 3Q26 earnings release - Financial investments [7] HSBC 3Q26 earnings release - Dividends [8] HSBC 3Q26 earnings release - Capital and regulatory developments [9] HSBC 3Q26 earnings release - Supplementary management view of reported revenue (3Q26) [10] HSBC 1H26 interim report - supplementary management view of revenue by quarter [11] HSBC 3Q26 earnings release - Supplementary management view of reported revenue (9M26) [12] HSBC 3Q26 earnings release - 3Q26 compared with 3Q25 - performance commentary [13] HSBC 3Q26 earnings release - IWPB - 3Q26 compared with 3Q25 [14] HSBC 3Q26 earnings release - Hong Kong - 3Q26 compared with 3Q25 [15] HSBC 3Q26 earnings release - Supplementary tables for Wealth - net new money [16] HSBC 3Q26 earnings release - Progress in growth areas [17] HSBC 3Q26 earnings release - Supplementary tables for Wealth - balances [18] HSBC 3Q26 earnings call summary (Drillr) [19] HSBC 3Q26 earnings release - Banking net interest income reconciliation [20] HSBC 3Q26 earnings release - Net interest income [21] HSBC 3Q26 earnings release - Outlook [22] HSBC 3Q26 earnings release - Balance sheet commentary [23] HSBC 3Q26 earnings release - Net interest income table [24] HSBC 3Q26 earnings release - Summary consolidated income statement [25] HSBC 3Q26 earnings release - Key financial metrics [26] HSBC 3Q26 earnings release - Hong Kong commercial real estate [27] HSBC 3Q26 earnings release - Credit risk - summary

Source [10] is HSBC's 1H26 interim report (6-K), published 2026-08-04: https://www.hsbc.com/-/files/hsbc/investors/results-and-announcements/stock-exchange-announcements/2026/august/sea-040826-e-2026-interim-results.pdf. Source [18] is a Drillr summary of the 2026-10-27 earnings call. All other sources are HSBC's 3Q26 earnings release (6-K), published 2026-10-27: https://www.hsbc.com/-/files/hsbc/investors/hsbc-results/2026/3q/pdfs/hsbc-holdings-plc/261027-3q-2026-earnings-release.pdf