HSBC’s profits fall 4% in Q1, driven by fraud-related charges and financial uncertainty tied to the ongoing Iran conflict
HSBC has reported a 4% drop in profits for the first quarter of 2026, as it faces a substantial $1.3 billion hit, stemming from both a fraud-related charge and the financial repercussions of the ongoing Iran conflict. The bank’s profits fell by $100 million, down to $9.4 billion, despite a 6% increase in revenue to $18.6 billion.
A significant portion of the losses is attributed to a $400 million charge related to a fraud scandal in the UK, tied to its investment banking division. The charge concerns loans made by HSBC to an unnamed private equity group, which became exposed through a collapse in the private credit sector. The fraud is reportedly linked to the downfall of home loan lender Mortgage Financial Solutions (MFS), with the bank’s exposure tied to loans made to the asset-backed lending unit of Apollo, Atlas SP.
HSBC’s Chief Financial Officer, Pam Kaur, explained that while the situation was “idiosyncratic” and the bank had always been cautious in its dealings with the private credit sector, this instance highlighted the risks associated with such investments. HSBC has a relatively small exposure of $6 billion to the sector, compared to its $1 trillion balance sheet. Despite this, Kaur stated that the bank is conducting additional due diligence to avoid future risks in similar situations.
The bank also set aside $300 million in provisions to cover potential losses from defaults linked to the ongoing conflict in the Middle East. While Kaur downplayed the immediate impact of the Iran war on HSBC’s operations, noting that business deals were still “flowing through” and the credit portfolio remained resilient, the bank has taken a cautious approach, mirroring the actions it took after the Russia-Ukraine war in 2022.
Shares of HSBC dropped more than 5% in response to the news, making it one of the biggest fallers on the FTSE 100. Despite these setbacks, Kaur remained optimistic, expressing confidence in the bank’s ability to handle the fallout from the Middle East tensions and noting that it would continue to invest in its wealth business in the region.
As the situation in the Middle East continues to evolve, HSBC is closely monitoring its exposure, hoping for stability in its credit portfolio, and is prepared to release the provisions should the conflict stabilise. However, the financial uncertainty and the ongoing fraud investigation have put significant pressure on the bank’s overall performance for the first quarter of 2026.