LONDON — HSBC reported that first-quarter profits fell 4% to $9.4bn, a drop of $100m compared with the same period in 2025, after taking a $1.3bn hit linked to fallout from the US–Israel war on Iran and fraud in the private credit sector. Revenue at the bank rose 6% to $18.6bn over the three-month period.

Potential losses on soured loans jumped to $1.3bn, of which $300m was linked to the impact of the Middle East conflict. The bank also reported a $400m fraud-related, secondary, securitisation exposure in the United Kingdom tied to its investment banking division.

The $400m charge involved loans HSBC made to an unnamed private equity group that was exposed to private credit–related loans. The case reportedly relates to the home loan lender Mortgage Financial Solutions. HSBC declined to confirm the name of the firm involved in the suspected fraud.

Mortgage Financial Solutions collapsed in February following allegations of fraud. Barclays said it had taken a £228m hit from the company. The UK financial regulator has launched an investigation into the Mortgage Financial Solutions matter.

HSBC's total exposure to the private credit industry was $6bn, set against a balance sheet of $1tn. The bank's shares dropped more than 5% on Tuesday morning, making it the biggest faller on the FTSE 100.

"We've always been very mindful of private credit risks," said Pam Kaur, chief financial officer. "In all such situations we do a broad read across, look at all high-risk concentrations and exposures across the board, and we don't see anything comparable there," she said.