HSBC Group's Revenue and Cost of Risk Would Deteriorate in Trade War Scenario, but Heightened Economic Uncertainty Not Affecting Q1 2025

Morningstar DBRS published a commentary on HSBC Holdings Plc's (HSBC) Q1 2025 results.

Key highlights include:
-- With solid performance in Q1 2025, HSBC's profit before tax excluding notable items increased to USD 9.8 billion, up 11% YOY.
-- Q1 2025 was characterised by solid results in the Wealth business (in Asia in particular) as well as in Foreign Exchange (as volatility drove demand and volume) and Debt and Equity Markets (in part driven by new client onboarding).
-- HSBC's expected credit losses were at 37 basis points (bps), lower than in Q4 2024; however, in plausible downside scenarios considering a slowdown in global growth caused by higher tariffs, it would likely increase above the Group's current F2025 guidance of 30 bps to 40 bps, according to our calculations.

"HSBC has reported solid Q1 2025 results, reflective of good activity in the Wealth business (Asia in particular) and CIB which benefited from increased market volatility", said Vitaline Yeterian, Senior Vice President, Sector Lead, European Financial Institution Ratings. "However, we also note higher uncertainty in specific sectors and geographies, meanwhile downside scenarios including tariffs escalation and broader global retaliatory actions, as explored by HSBC, would likely lead to lower revenue and higher cost of risk".