UBS has released a research report stating that HSBC Holdings (00005) reported a second-quarter adjusted pre-tax profit of $10.34 billion, up 13% year-on-year and 5% above market consensus, driven by better-than-expected revenue. The bank's net interest income for the quarter was 1% above market estimates, while fee and other income exceeded forecasts by 4%. Operating expenses were in line with expectations, leading to pre-provision operating profit beating the market consensus by 4%.

UBS maintains a "Neutral" rating on HSBC Holdings with a target price of 1,520 pence, equivalent to a 2027 forecast price-to-earnings ratio of 11.5 times and a price-to-tangible book value ratio of 2.2 times. UBS noted that HSBC's loans grew by 2% quarter-on-quarter in the second quarter, while deposits increased by 2.6% (both on a constant currency basis). The Common Equity Tier 1 (CET1) ratio stood at 14.1%, 10 basis points below market consensus, as risk-weighted assets were 1% higher than expected.

The company announced an interim dividend of 10 US cents per share and resumed a share buyback program of up to $1 billion. However, this amount is significantly lower than UBS's initial expectation of approximately $2 billion. Management updated its full-year 2026 guidance, raising the bank's net interest income forecast from "approximately $46 billion" to "at least $46 billion." Cost guidance is set at 1% above the 2025 adjusted cost base of $33.9 billion, implying around $34.24 billion. Loan impairment charges are expected to be around 45 basis points, with the CET1 ratio targeted between 14% and 14.5%. The group's structural simplification savings target has been increased from approximately $1.5 billion to about $2 billion, while restructuring costs remain at $1.8 billion. The 2026 to 2028 targets remain unchanged, including annual revenue growth (reaching 5% by 2028), a return on tangible equity of 17% or above, and a 50% dividend payout ratio.

UBS believes that while HSBC's first-half trends were strong, the scale of the buyback program and the upward revision to the bank's net interest income guidance both fell short of the firm's expectations. Furthermore, the three-year targets remained unchanged, suggesting that today's announcements are unlikely to prompt a market reassessment of its financial outlook.