HSBC Set to Announce Q1 Earnings: What's in Store This Time?

HSBC Holdings HSBC is scheduled to announce first-quarter 2025 results tomorrow, before market open. The company’s quarterly revenues and earnings are expected to have decreased on a year-over-year basis.

In the last reported quarter, HSBC’s results were aided by lower expenses. However, a rise in expected credit losses and other credit impairment charges (ECL) and a fall in revenues were the undermining factors.

The consensus estimate for the company’s earnings is pegged at $1.60 per share, which has remained unchanged in the past seven days. This indicates a decline of 5.9% from the year-ago quarter’s reported number.

The consensus estimate for sales is pegged at $16.46 billion, implying a 20.7% fall.

Major Factors Expected to Impact HSBC’s Q1 Results

Investment Banking (IB) Revenues: Global mergers and acquisitions (M&As) in the first quarter of 2025 were less impressive than previously expected. Deal value and volume rose marginally, mainly led by the Asia Pacific region. Ambiguity over the tariff policies and ensuing trade war resulted in extreme market volatility. These led to economic uncertainty, with data suggesting a slowdown in the U.S. economy and rising inflationary pressure. Amid such a backdrop, companies started rethinking their M&A plans despite stabilizing rates and having significant investible capital. Thus, advisory fee growth is likely to have been marginal for HSBC.

Further, the IPO market saw signs of cautious optimism, given the market volatility, geopolitical challenges and rising flotation costs. The equity market performance drove some decent activity in follow-up equity issuances. Yet, bond issuance volume was strong on solid investor demand and tighter spreads, but uncertainties persist due to a tough macroeconomic environment. Thus, HSBC is expected to have witnessed a decent growth in equity and debt underwriting fees.

Hence, growth in IB revenues is expected to have been modest in the quarter.

Trading Revenues: Client activity and market volatility were solid in the first quarter.  The likelihood of a trade war, sticky inflation and higher-for-longer interest rates alongside recessionary fears affected client activity. Further, volatility was high in equity markets and other asset classes, including commodities, bonds and foreign exchange. 

Owing to solid volatility and higher client activity, HSBC’s trading business performance is expected to have been solid.

Interest Income: In the first quarter, the central banks across the globe exhibited a mixed approach to interest rate adjustments. This reflected divergent perspectives on the economic outlook, with some central banks prioritizing inflation control while others focused on potential economic downturn. Hence, these are likely to have resulted in the stabilization of funding costs for HSBC and a modest rise in loan demand.
 
Thus, HSBC’s interest income is anticipated to have improved in the to-be-reported quarter.

Expenses: Over the past several years, HSBC has been able to control expenses. However, overall costs are expected to have been high in the to-be-reported quarter, given the company’s focus on growing market share in the U.K. and Asia, as well as strengthening digital capabilities globally.
 
HSBC’s organizational overhaul plan is likely to have resulted in a further increase in expenses.

What the Zacks Model Unveils for HSBC

Our quantitative model does not conclusively predict an earnings beat for HSBC. This is because it lacks the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP for HSBC is 0.00%.

Zacks Rank: The company currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Finance Stocks Worth Considering

Here are a couple of finance stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time:

The Earnings ESP for Enova International, Inc. ENVA is +2.41%, and it carries a Zacks Rank #2 (Buy) at present. The company is slated to report first-quarter 2025 results tomorrow. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

Over the past 30 days, the Zacks Consensus Estimate for ENVA’s quarterly earnings has remained unchanged at $2.77 per share.

WesBanco, Inc. WSBC is also scheduled to release first-quarter 2025 numbers tomorrow. The company has an Earnings ESP of +0.42% and carries a Zacks Rank #3 at present.

Quarterly earnings estimates for WSBC have been revised 3.4% upward to 60 cents per share over the past month.

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This article originally published on Zacks Investment Research (zacks.com).

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