HSBC reported a 32% surge in third-quarter pre-tax profits to $9.6 billion on October 27, driven by higher net interest income, lower credit losses, and reduced legal provisions. The bank also announced a $1 billion share buyback program, matching its previous quarterly allocation, and maintained its interim dividend at $0.10 per share.
The results, which exceeded analyst expectations, come as Chancellor John Healey prepares to deliver his first Budget on October 28. Reports indicate the government may increase the bank profits surcharge from 3% to 8%, reversing a tax cut implemented by the previous Conservative administration.
HSBC’s financial performance
HSBC’s pre-tax profit of $9.6 billion for the three months ending September 30 represented a $2.3 billion increase compared to the same period last year. The bank attributed the growth to higher net interest income, which rose 6% year-over-year to $9.3 billion, supported by elevated interest rates and deposit growth. Expected credit losses fell 17% to $800 million, while operating expenses decreased 12% to $8.8 billion, primarily due to the absence of $1.4 billion in legal provisions recorded in the prior-year period.
The bank’s revenue totaled $18.6 billion, slightly below analyst estimates of $18.93 billion. Its wealth management division reported flat revenue of $2.7 billion, a significant slowdown from 15% and 23% year-over-year growth in the first two quarters of 2025. HSBC reaffirmed its commitment to meeting core profitability targets through 2028, despite macroeconomic headwinds such as inflation and geopolitical tensions.
Leadership response to tax proposals
HSBC’s chief financial officer, Pam Kaur, stated the bank faces “no pressure” to relocate from the UK amid speculation that higher taxes could prompt such a move. She emphasized the bank’s long-term commitment to its UK domicile, noting, “We are domiciled in the UK and we remain in the UK so that question is just not on the table.” Kaur added that HSBC is “very comfortable” with its current financial position and ability to meet targets regardless of tax changes.
The bank has also accelerated its cost-cutting initiatives, exceeding its annual savings target by $400 million in the third quarter. HSBC reported $1.9 billion in cost reductions year-to-date, with CEO Georges Elhedery highlighting the bank’s strategic focus on efficiency and investment capacity.
Policy implications and industry reactions
The profit surge has intensified calls from activist groups and trade unions for the government to implement a windfall tax on banks, arguing that elevated interest rates have generated disproportionate profits. Paul Nowak, general secretary of the Trades Union Congress (TUC), stated, “Banks can afford to contribute more,” pointing to HSBC’s results alongside those of Barclays, which also reported strong earnings.
Industry representatives, however, have warned that a higher bank surcharge could reduce lending, increase mortgage rates, and undermine the UK’s competitiveness. The British Bankers’ Association has lobbied against the proposed tax hike, asserting it would harm economic growth.
HSBC’s UK arm, which accounts for one-fifth of the bank’s total annual profit, reported a third-quarter pre-tax profit of $1.8 billion, an 8% increase from the prior year. The division’s performance reflects challenges in the domestic market, where higher inflation and interest rates have dampened consumer spending and the housing market. HSBC revised its UK GDP growth forecast downward from 1.4% to 1.1% ahead of the Budget.
Regulatory and structural adjustments
HSBC noted that upcoming Basel 3.1 regulatory reforms would improve its core capital ratio by up to 0.5 percentage points, providing additional financial flexibility. The bank also confirmed it is exploring job cuts in its UK wealth management division as part of a broader push to adopt artificial intelligence and streamline operations.
The earnings announcement follows a period of significant cost reductions, with HSBC on track to achieve its $2 billion annual savings target by year-end. The bank’s shares, which had risen 11% year-to-date, declined 5% following the results, reflecting investor concerns over the wealth division’s performance and macroeconomic uncertainties.
Market and analyst perspectives
Analysts broadly viewed HSBC’s results as in line with expectations, with the bank’s profit growth and buyback announcement providing a modest boost to shareholder returns. However, the slowdown in wealth management revenue and the potential for higher taxes introduced near-term headwinds for the stock.
HSBC’s performance underscores the divergent fortunes of global banks in 2025, with lenders benefiting from higher interest rates while navigating regulatory and political pressures. The Budget announcement on October 28 is expected to clarify the government’s stance on bank taxation and its broader economic priorities.