Global News, Top 3, UK News
Apollo, Castlelake, Elliott Management, Georges Elhedery, HSBC
HSBC reported a drop in first-quarter profits after taking a $400m (£295m) fraud-related charge linked to its exposure to collapsed UK mortgage lender Market Financial Solutions (MFS).
The banking giant said profit before tax fell to $9.4bn, down $0.1bn on the same period last year, driven by higher credit losses.
Credit impairment charges rose to $1.3bn in the quarter, up $0.4bn year-on-year, the bank reported. HSBC said the $400m hit related to a fraud-linked secondary securitisation exposure involving a UK financial sponsor.
The exposure was tied to MFS, the Financial Times first reported, which collapsed earlier this year amid fraud allegations, in the latest credit shock to hit both banks and private credit markets. Other financial institutions reported to be caught up in the fallout include lenders Elliott Management, Castlelake and Apollo’s Atlas SP unit.
The charge comes amid a broader wave of fraud-related stress across credit markets, following high-profile failures such as US auto parts supplier First Brands Group and sub-prime auto lender Tricolor Holdings, as investors grow increasingly wary of hidden risks.
HSBC also flagged geopolitical pressures, with conflict in the Middle East contributing to rising credit impairments. Around $300m of the bank’s total credit losses were set aside to reflect heightened uncertainty linked to the region.
Despite the hit to profits, revenue edged higher, rising by $100m to $18.6bn compared with the first quarter of 2025. The increase was driven primarily by strong growth in the bank’s wealth division and its Hong Kong business.
“Each of our four businesses contributed to firm-wide revenue growth and each delivered an annualised return on average tangible equity in excess of 17 per cent, excluding notable items,” said Georges Elhedery, HSBC’s chief executive. “In periods of greater uncertainty, customers turn to us more as their trusted partner to navigate complexity with the financial strength, stability and expertise they know they can rely on.”
