Oct 27, 2026 earnings call — Basel 3.1 impact and deposit mix
Revenue grew 5% to $18.7 billion and management estimates a 40 to 50 basis points Basel 3.1 benefit.
Revenue $18.7B (est $19.0B) · EPS $2.10 (est $2.20)
Key quotes
"Today, we are giving you our estimated Basel 3.1 impact of 40 to 50 basis points, which will apply from 1st January 2027."
"In terms of emerging trends, in Hong Kong, we saw increased time deposit margin pressure this quarter. Most of our strong growth has been in time deposits."
"Wealth net new money at $38 billion in Asia this quarter brings our year-to-date flow to more than $95 billion."
Analyst Q&A 14
Hong Kong deposits and Basel 3.1
Q (Guy Stebbings · BNP Paribas): He asked how Hong Kong deposit behavior evolved through the quarter and into Q4, and whether HSBC is negatively exposed if HIBOR rises. He also asked for a break out of the 40 to 50 basis points Basel 3.1 benefit and whether firm-specific capital reductions matter.
A: Management said higher rates push customers toward more time deposits, with about a 2 percentage point shift late in the quarter and a context that time deposits rose to 40% previously versus 38% now. They said HIBOR sensitivity has been reduced but higher HIBOR is directionally positive for banking NII, and the 40 to 50 basis points from Basel 3.1 comes from lower sovereign risk RWAs, SME exposure calculations and changes to foundational IRB for large corporates. Pillar 2A reductions are beneficial but smaller than the 40 to 50 basis points RWA impact.
"Interest rate increases are positive for banking NII." — Manveen Kaur (CFO)
Cost of risk and disposals impact
Q (Benjamin Toms · RBC): He asked why Q3 cost of risk was much lower than guidance and whether reiterating 45 basis points is just conservative. He also asked if 2027 could return to 30–40 basis points and whether consensus reflects revenue and cost effects from disposals in 2027–28.
A: Management said they were pleased with portfolio performance in Q3 and see nothing of concern for Q4, but they keep guidance at 45 basis points as a conservative stance because they keep the books open until the end of January. They did not comment on 2027 impairments, noted their historical risk appetite around 30 to 40 basis points, and reiterated Slide 20 numbers: $2.2 billion cumulative revenue impact from disposals (50% banking NII, 50% fee), $700 million in 2026 skewed to fee, $900 million in 2027 more balanced, and $600 million in 2028 skewed toward banking NII.
"So firstly, from a cost of risk perspective, we were very pleased with the performance of our portfolios in Q3." — Manveen Kaur (CFO)
Hong Kong time-deposit threshold and NII
Q (Joseph Dickerson · Jefferies): He asked if there is a time-deposit threshold that would make HSBC uncomfortable given industry levels, and whether the expected deposit and NII growth relationship (e.g., 4% deposits and 6% NII) is acceptable.
A: Management clarified the 40% time-deposit figure was a prior high; this quarter it was 38%, and their CASA balances remain better than market average so they expect that to continue. They said from an NII perspective Hong Kong deposits remain positive and incremental, they are comfortable with current deposit growth, and loan-to-deposit ratios remain in a comfortable range so they are not worried about slowing deposit growth.
"And of course, our CASA balances have always been better than the market average, the time deposit being lower, and I expect that to also continue." — Manveen Kaur (CFO)
U.K. deposits, asset growth, and Wealth
Q (Aman Rakkar · Barclays): He asked if U.K. term deposits will shift materially and whether higher marginal funding costs would change appetite for U.K. asset growth. He also asked about the run rate for Wealth given softer comps and policy shifts.
A: Management said U.K. deposit competition is visible but Hong Kong is the more material factor for banking NII. They will continue to pursue asset growth (mortgages, commercial) only within strict risk-return hurdles and risk appetite. On Wealth, they said it is a long-term strategic priority, gave examples like 16% Private Bank growth and $38 billion net new money in Asia ($41 billion globally), and said product mix will cause quarter-to-quarter variation but they remain confident in long-term growth.
"So we will continue to lean in for our asset growth as long as it's within our risk appetite and on hurdle rate." — Manveen Kaur (CFO)
Use of Basel 3.1 capital
Q (Andrew Coombs · Citi): He asked whether the 40–50 basis points Basel 3.1 capital release is earmarked and if it gives more flexibility for dividends, buybacks or deployments. He also asked whether redeploying saved costs will generate more revenue than the $2.2 billion attrition shown.
A: Management said the Basel 3.1 benefit starts on 1 January and, together with capital generated in Q4, will leave them strong going into 2027; deployment priorities remain the same: 50% dividend payout, organic growth and residual share buybacks. On redeployed costs, they said they will put costs into businesses where they have scale and the right to win, expecting to generate that revenue and more quickly, though there will be some short quarter-on-quarter time lag.
"So the starting point from the capital in addition to the capital we generate in Q4, where we remain very confident in terms of our targets and guidance will give us a strong position going into 2027." — Manveen Kaur (CFO)
Customer acquisition, ODI, and transactions
Q (Kian Abouhossein · JPMorgan): He asked if the slowdown in monthly customer acquisitions in Hong Kong is seasonal or structural, whether ODI rules affected the quarter, and how falling transaction volumes affect the Hong Kong retail franchise.
A: Management said monthly new-account acquisition has stayed around 100,000 per month on average; the Q2 spike reflected competitors pausing to upgrade compliance in May–June, and levels then normalized. They said they have not seen specific changes from Chinese regulation (ODI) in product mix or behavior, and transaction volumes shift with market conditions—less brokerage when equities are sluggish but more mutual funds and structured product sales.
"So firstly, our monthly customer acquisitions, if you look at an average for the first half of this year or even last year, have stayed pretty steady at about 100,000 per month." — Manveen Kaur (CFO)
HK deposit competition and net new money
Q (Melissa Kuang · Goldman Sachs): She asked how intense deposit competition in Hong Kong has been, whether it will last into next year, and whether net new money this quarter is sustainable or driven by a one-off India uplift.
A: Management said CASA-to-TD migration is normal in higher-rate periods and TD share can move from low 30s up to 40%. Time-deposit margin pressure comes from competitors with different loan-to-deposit ratios leaning into deposits to fund lending. On net new money, they said FCNR helped this quarter while Australian deposits fell, that the FCNR uplift closed at the end of August and most of that book is 5-year, and that net new-money trends remain encouraging due to improved customer journeys and private-bank investments.
"And the time deposit proportion can move from sort of low 30s to right up to 40%, so there's nothing surprising there." — Manveen Kaur (CFO)
Capital target and HTCS holdings
Q (Robert Noble · Deutsche Numis): He asked why HSBC was comfortable running below its capital target this quarter and whether it will move to the lower end pro forma Basel. He also asked why HSBC holds sizable HTCS assets and if the current structure is acceptable.
A: Management reiterated their target operating range is 14% to 14.5% and said they feel comfortable even at the lower end given their books, risk profile, Basel and Pillar 2A, and can still do share buybacks. On HTCS, they said HTCS is only one-sixth of the structural hedge, with duration around 3–3.2 years similar to hold-to-collect; other HTCS holdings for liquidity are larger but short-duration and less sensitive, and they can adjust holdings when yields spike, so sensitivity is much lower than in 2022.
"So firstly, coming back from a capital perspective, I would reiterate, our target operating range is 14% to 14.5%." — Manveen Kaur (CFO)
Deposit competition change and variable pay
Q (Amit Goel · Mediobanca): He asked why the current deposit competition seems more impactful than Q2 and whether HSBC will change behavior. He also asked about timing and process for incremental CIB variable compensation in Q4.
A: Management said quarter-end competitive spikes and the intra-quarter customer shift from CASA to TD are different phenomena; they will not compete into negative NII at quarter-ends because their loan-to-deposit ratio means they do not need to. On variable pay, Wholesale Transaction Banking had a standout quarter; they will review full-year numbers in January and may add to variable pay only if warranted, and any uplift would be a rounding effect on overall cost growth.
"So we are not going to go and compete in a negative NII space to garner deposits just at a quarter-end because, frankly, we don't need to given where our loan-to-deposit ratio is." — Manveen Kaur (CFO)
Variable pay and 2027 cost outlook
Q (Edward Hugo Firth · KBW): He asked if HSBC would pay extra variable compensation based on consensus revenue being ahead of targets, and whether consensus cost growth for 2027 (around 5% or 7% adjusted for disposals) is realistic.
A: Management said they are not giving guidance on costs for next year and that baseline simplifications are already built in; future cost growth will depend on inflation, investment, redeployment of cost base from disposals, and Hang Seng synergies in 2027–28. On variable pay, they said they do not decide pay based on consensus; decisions are based on internal financial planning, the quantum and quality of outperformance, and then market alignment when reviewing compensation.
"In terms of the revenue, we don't decide variable pay based on consensus or otherwise." — Manveen Kaur (CFO)
Wealth regulatory impact and U.K. deposits
Q (Alastair Warr · Autonomous): He asked whether the new NDRC document changes the May–June new-to-bank surge story and whether it mostly targets ODI, and he asked for color on U.K. deposit migration versus competition and whether HSBC will let LDR rise.
A: Management said May–June were extraordinary months when competitors paused onboarding for compliance upgrades, and levels have since normalized; they view recent guidance as further clarity to comply with existing Chinese regulations and welcome a level playing field. On the U.K., they said HSBC has a very strong deposit position and the lowest loan-to-deposit ratio there, and retail’s impact on the overall U.K. position is much smaller than the movements seen in Hong Kong.
"I would just reiterate, all the guidance we are seeing coming is actually further guidance to continue to comply with existing Chinese regulatory requirements." — Manveen Kaur (CFO)
Sources of Asia net new money
Q (China): He asked what drove the $38 billion net new money in Asia this quarter and how wealth management revenue should be expected to develop longer term after removing high-base effects.
A: Management said the $41 billion global and $38 billion Asia net new money included $14.5 billion from the India FCNR position and also reflected reducing Australia deposits; they also saw net new money across other Asian geographies. They described the inflows as broad-based, often coming from existing customers using multiple products, and said this gives confidence for future wealth growth beyond product-level effects.
"So the net new money which we saw overall of $41 billion and Asia of $38 billion, it included the $14.5 billion from the India FCNR position, but also there was the Australia deposits, which have been reducing." — Manveen Kaur (CFO)
Loan growth sources and deposit effect
Q (Jiahui Yan · CICC): She asked about the composition of loan growth, specifically the portion linked to the AI industry chain, the sustainability of loan growth, and whether deposit competition might force moderation of deposit gathering and thus constrain asset growth.
A: Management said loan growth is very broad-based; for example, $7 billion quarter-on-quarter came from Hong Kong mainly in retail mortgages, the U.K. commercial book grew 13% year-on-year, and CIB lending and trade-related operating lending also contributed. They said data center lending is very small for HSBC, growth also comes from innovation banking, infrastructure and sustainability lending, and deposit growth is broad-based across retail and commercial so it is not constraining lending—loans must still meet risk appetite and hurdle rates.
"For example, overall, like $7 billion quarter-on-quarter came from Hong Kong, mainly retail lending, and that's mortgages." — Manveen Kaur (CFO)
HK deposit strategy and migration timing
Q (Katherine Lei · JPMorgan): She asked whether HSBC changed strategy on deposit competition compared with the prior cycle when it gave up share to protect deposit cost, and whether CASA-to-TD migration is front-loaded if rates keep rising.
A: Management said after privatizing Hang Seng they intend to fully participate in Hong Kong growth and are growing deposits more than a few years ago while also seeing good lending growth, so context has changed. They reiterated higher rates tend to lead to more time deposits but customer behavior can shift (for example toward shorter-term 7-day deposits), and they will continue to support growth in Hong Kong on both sides of the balance sheet because it remains margin accretive.
"So firstly, we are very mindful that now that we have invested in Hong Kong with the privatization of Hang Seng, we want to be fully participating with the growth in Hong Kong." — Manveen Kaur (CFO)