HSBC announced a 32% increase in quarterly profits on 27 October, reporting earnings of $9.6bn for the three months to September and committing to distribute $2.7bn to shareholders through buybacks and dividends. According to The Guardian, the result comes as Chancellor John Healey prepares to unveil his budget on 28 October, with the strong banking sector performance likely to inform decisions on potential tax increases affecting financial institutions.
The London-based lender's third-quarter performance was underpinned by higher interest rates, reduced loan losses and lower legal provisions compared to the same period a year earlier. However, HSBC's earnings release revealed that the 32% profit increase was substantially driven by a $1.4bn favourable impact from notable items, reflecting the absence of legal provisions that had been recorded in the third quarter of 2025. The bank's profit before tax, excluding notable items, reached $10.0bn, while revenue climbed to $18.6bn, up $0.8bn year on year.
How will the shareholder payout be structured?
HSBC will distribute the $2.7bn through two mechanisms: a $1bn share buyback programme and an interim dividend of $0.1 per share, which the bank calculated would deliver approximately $1.71bn to investors. The buyback is expected to be completed by the time HSBC announces its full-year 2026 results, according to the bank's guidance.
What drove the improvement in profitability?
Net interest income—the spread between what banks charge borrowers and pay depositors—increased to $9.3bn from $8.8bn in the prior year. This expansion benefited from the bank's hedging strategy and growth in deposits held in Hong Kong, though deposits in the UK remained flat. The improvement in credit quality also supported results, with loan losses declining from the previous year's levels.
The bank's annualised return on average tangible equity reached 17.7%, compared with 12.3% a year earlier; excluding notable items, it was 18.2%. This metric reflects the efficiency with which HSBC deployed shareholder capital during the quarter.
What is the context for bank taxation ahead of the budget?
HSBC's strong results arrive amid growing political pressure on the banking sector to contribute more in taxes. Chancellor Healey has been preparing to raise taxes on Britain's banking sector in his 28 October budget to address fiscal pressures caused by the Middle East conflict, with the most likely option involving raising the bank surcharge from its current 3% to 8%, a move that could raise approximately £2bn annually. HSBC's results follow similar strong performances from competitors: Barclays reported a 12% jump in third-quarter profits of £2.3bn earlier in the month, and its chief executive accepted higher bank taxes as "bearable" ahead of the budget announcement.
What are critics saying about bank profits and household costs?
Abhijay Sood, economist at the New Economics Foundation, argued that the government should pursue more aggressive taxation of the banking sector.
It's not surprising that HSBC have made such significant profits in the last quarter, but it will be difficult news to swallow for households struggling with rising mortgage costs. Like other big banks, its profitability has depended on keeping interest rates on savings accounts low, and a "stealth subsidy" from taxpayers via the Bank of England due to quantitative easing.
Sood contended that restoring the bank surcharge to 8% would raise only £1.8bn annually and urged the chancellor to pursue additional measures.
While the rumours of a bank tax change in the Budget are welcome, it is unlikely to go far enough. While banks are making over a billion pounds a week of profit, NEF analysis suggests that the restoration of the bank surcharge to 8% would raise just £1.8bn a year from them. The chancellor should go further by clawing back the stealth subsidy, and use this to fund inflation-busting investment and keep the essentials of life affordable for ordinary people.
How is HSBC responding to the growth agenda?
Pam Kaur, HSBC's chief financial officer, expressed support for the government's economic priorities during media remarks on 27 October.
We only have 24 hours to go. We are very encouraged by the government's growth agenda, particularly how we can lean-in to support not just specific sectors like UK innovation, infrastructure and the UK trade deals, but also in terms of how we are the connector for the UK with the rest of the world, given the success the government has had with many of these international trade deals.
Kaur indicated that HSBC would adjust its lending behaviour in response to customer demand, stating:
Now, obviously, as our customers make their business investment decisions, we will respond accordingly, because that's what we do as banks. When the lending demand goes up, we lend more. We are ready with the right risk appetite to do so. We'll just have to see how businesses and customers react.
What did HSBC's leadership say about the results?
Georges Elhedery, HSBC's group chief executive, framed the results as validation of the bank's strategic direction.
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. As we simplify HSBC, we are creating greater capacity to invest, grow and deliver strong returns for our shareholders.
What are HSBC's expectations for credit losses?
HSBC has established a medium-term target range for expected credit-loss charges of 30–40 basis points of average gross customer loans. For 2026, the bank expects credit losses to run at approximately 45 basis points, slightly above the medium-term target, reflecting current economic conditions and the bank's risk appetite.
Key Facts
- HSBC reported third-quarter profit of $9.6bn, up 32% year on year, though the increase was substantially driven by a $1.4bn favourable impact from the absence of legal provisions recorded in the prior year
- The bank will distribute $2.7bn to shareholders via a $1bn buyback and $1.71bn in interim dividends
- Net interest income rose to $9.3bn from $8.8bn, supported by hedging gains and deposit growth in Hong Kong
- The results arrive as Chancellor Healey prepares to announce potential bank tax increases in his 28 October budget, with a rise in the bank surcharge from 3% to 8% expected to raise around £2bn annually
- HSBC's annualised return on average tangible equity reached 17.7%, compared with 12.3% in the prior year
