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HSBC has warned over a potential hit to revenues and rising bad debts in the event of significantly higher tariffs worldwide as it posted lower quarterly profits and forecast lending will remain muted in 2025.
The UK’s largest bank, which is heavily exposed to Chinese and Asian markets, said in the “plausible downside” scenario of surging tariffs, it could face a “low single-digit percentage” impact on its revenues and around an extra 500 million US dollars (£372.8 million) in bad debts.
The group increased its provisions for loans expected to turn sour by 202 million US dollars (£150.7 million) year-on-year to 876 million (£653.4 million) in the first quarter of 2025 to reflect “heightened uncertainty and a deterioration in the forward economic outlook”.
It added that “given current levels of uncertainty and market turmoil, we expect demand for lending to remain muted during 2025”.
The comments came as it posted a 25% drop in pre-tax profit to 9.5 billion US dollars (£7.1 billion) but this was better than expected by most analysts.
HSBC’s quarterly revenue also decreased by 15% compared with quarter one of 2024, with the company bringing in 17.6 billion dollars (£13.2 billion) for the same period in 2025, though the fall in sales and profits was largely due to the impact of disposals of businesses in Canada and Argentina.
Shares lifted 2% in Tuesday afternoon trading.
The bank is seen as having greater exposure to global trade disruption given its operations across Asia.
But it said it was yet to see any sign of customers defaulting in the face of the trade war between America and China, and US President Donald Trump’s sweeping 10% tariffs on goods entering America, which caused chaos in stock markets around the world.
Chief executive Georges Elhedery said: “We continue to support our customers through this period of economic uncertainty and market unpredictability, which we enter from a position of financial strength.”
He added: “Ourselves and our customers as a whole are hopeful that we can see progress in the trade negotiations between the US and a number of parties, including China.”
He said the group did not forecast the “end of globalisation, but a reconfiguration of globalisation” where trading partner corridors “will continue shifting geographically”.
Mr Elhedery said the results were “strong”, crediting the firm’s ability to weather the recent global economic turbulence.