HSBC Holdings reported weaker-than-expected first-quarter results after a surprise charge tied to the collapse of UK mortgage lender Market Financial Solutions. The bank also raised credit loss expectations as the Middle East conflict added pressure to its economic outlook.
HSBC reported pretax profit of $9.4 billion for the first quarter, below the $9.6 billion average estimate compiled by the bank. Profit also slipped from $9.5 billion a year earlier, while revenue rose 6% to $18.6 billion.
The London-based lender said expected credit losses rose to $1.3 billion during the period. The figure included a $400 million charge linked to a UK ‘fraud-related, secondary, securitization exposure’ and a $300 million allowance tied to weaker global economic conditions.
The $400 million charge relates to Market Financial Solutions, also known as MFS, according to people familiar with the matter. MFS entered administration after fraud allegations, drawing in several financial firms exposed to the lender.
HSBC’s exposure was linked to loans involving Apollo-backed Atlas SP and its financing of MFS, according to Reuters. HSBC Chief Financial Officer Pam Kaur declined to name the companies involved but confirmed the case was tied to ‘private credit-related loans.’
Kaur said the issue was ‘idiosyncratic’ and added, ‘We feel comfortable this is a one-off.’ However, the charge has raised fresh questions about how global banks manage indirect exposure to private credit markets.
HSBC said it has $111 billion in private-markets-related exposure, including $22 billion tied to private credit. The bank also said it reviewed high-risk exposures and found no similar cases across its book.
The MFS case has already affected other lenders. Barclays reported a £228 million impairment charge linked to the same collapse, while other banks and investment firms have also been named among affected parties.
Regulators in the United States, Britain, Canada, and other markets have increased checks on banks’ private credit exposure. The sector has grown quickly, and officials have focused on risks linked to indirect lending structures.
HSBC also booked $300 million in allowances due to the worsening global outlook after the Middle East conflict widened. The bank has strong links to Asia and the Middle East through its wealth, trade finance, and corporate banking operations.
The lender now expects 2026 expected credit loss charges to reach about 45 basis points of average gross loans. Its earlier estimate stood near 40 basis points. The bank cited ‘uncertainty in the outlook’ as one reason for the change.
HSBC shares fell as much as 6.3% in London after the results. The drop followed a strong run in the stock over the past year, supported by restructuring, cost cuts, and investor confidence in the bank’s Asia-focused strategy.
CEO Georges Elhedery has been reshaping HSBC since taking charge in September 2024. The bank has sold, merged, and closed some businesses to simplify operations and lower costs. However, the latest results show that credit charges, fraud-linked exposure, and geopolitical risks remain key pressure points for the lender.
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