Asia-focused lender HSBC (LON:HSBA) extended its share buyback as its Q3 earnings missed market forecasts. On balance, investors took a negative view of the update sending the bank’s London-listed shares down nearly 7%.
Q3 earnings miss estimates
For the three months to September, HSBC reported a 4.5% or $0.8 billion increase in revenue to $18.6 billion. Within that, however, net interest income only increased 6% or $0.5 billion to $9.3 billion, missing market estimates.
Operating costs were 12% or $1.3 billion lower at $8.8 billion, due mainly to fewer charges for Hong Kong commercial real estate. That meant profit before tax increassed 32% or $2.3 billion to $9.6 billion, but again this missed market estimates.
Moreover, profit was boosted by $1.4 billion of lower legal provisions and $0.2 billion of lower provisions for expected credit losses. Therefore, as well as missing estimates, investors questioned the quality of the Q3 earnings.
HSBC key Q3 2026 figures (in $ billions)
| Q3 2026 | Q3 2025 | Change | |
| Revenue | 18.6 | 17.8 | +4.5% |
| Net interest income | 9.3 | 8.8 | +6.0% |
| Operating costs | 8.8 | 10.1 | -12% |
| Pre-tax profit | 9.6 | 7.3 | +32% |
Source: Company accounts
Share buyback extended
The bank posted a small increase in loans and deposits during the quarter, with continued momentum in retail inflows in Hong Kong. However, the bank noted it had seen lower deposit balances in commercial banking due to short-term outflows.
The bank’s CET1 (common equity tier one) capital ratio declined slightly to 13.9% due to an increase in risk-weighted assets. Nevertheless, the board approved the third interim dividend of $1.10 per share in line with its 50% payout policy.
The board also nodded through another share buyback of up to £1 billion. The previous $1 billion buyback was completed at the end of September 2026.
To be fair to HSBC, a 7% sell-off is a harsh response to what by most standards was a marginal miss. Pre-tax profit fell short of estimates by just $100 million, but it was still 32% higher than the previous year.
We suspect investors had too high expectations ahead of these numbers for the positive impact of interest rates on the bank’s P&L. Also, some of that 32% increase was due to lower bad loan provisions so the quality maybe wasn’t what it could be.
At the end of the day banks are giant cyclical stocks, and their earnings move with the economy. In HSBC’s case, that’s not the UK so much as Asia and the US.
As long as the global economy muddles through, despite wars, high fuel prices and sticky inflation, banks should do ok. For its part, HSBC is sticking to its revenue and return on capital targets and doesn’t seem overly concerned.
