Goldman Sachs maintains Buy on HSBC and raises 0005.HK target price to HK$181

Overview

This is a Goldman Sachs preview report on HSBC's second-quarter 2026 results. The report expects HSBC to announce 2Q26 results on August 4 and deliver another robust quarter: underlying pre-tax profit is forecast at US$10.2bn, up 25% year over year and 2% quarter over quarter, 4% above Visible Alpha consensus. The main support comes from lower credit costs, improved banking NII, and strong capital return capacity.

Core views

Goldman Sachs' core view is that a higher-for-longer rate environment, improving HIBOR, structural hedge reinvestment, and balance sheet repricing will support upward revisions to HSBC's banking NII and earnings forecasts; non-interest income is expected to remain resilient, though wealth management may slow quarter over quarter due to the high base in 1Q26; credit costs are expected to normalize; capital remains strong enough to support the resumption of buybacks.

Analysis framework

The report uses an earnings preview and forecast revision framework, comparing Goldman Sachs forecasts with Visible Alpha consensus, and breaks down 2Q26 and 2026-2028 earnings elasticity around NII, non-interest income, credit costs, expenses, capital, and shareholder returns. For valuation, it uses a 12-month two-stage DDM target price methodology.

Methodology notes

• Valuation methodsTwo-stage DDM

  Target price estimation

  Goldman Sachs uses a 12-month two-stage dividend discount model to raise the target prices for 0005.HK and HSBA.L.

• Earnings forecastVisible Alpha consensus comparison

  Forecast variance analysis

  The report compares Goldman Sachs forecasts for revenue, expenses, credit costs, PBT, EPS, and other metrics with Visible Alpha consensus to assess the potential for earnings upside.

• Factor frameworkGS Factor Profile

  Growth, financial returns, valuation multiples, and composite percentile

  Goldman Sachs states that its factor framework compares stocks versus the market and industry peers based on metrics related to forward sales, EPS, ROE, P/E, P/B, dividend yield, and others.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• 0005.HK

  HSBC's Hong Kong-listed common shares, one of the report's core covered securities.

  Strengths

  Target price raised to HK$181; benefits from improved banking NII, upward earnings revisions, and resumed buybacks.

  Weaknesses

  Wealth management in 2Q may slow quarter over quarter due to the high base in 1Q; expenses are rising because of growth initiatives and technology investment.

  Comparison

  Goldman Sachs forecasts 2Q26 underlying PBT 4% above Visible Alpha consensus.

  Risks

  Weaker rate environment, lower HIBOR, weaker-than-expected wealth inflows, and rising credit costs.

• HSBA.L

  HSBC's London-listed common shares, one of the report's core covered securities.

  Strengths

  Target price raised to 1,725p, while maintaining a Buy rating.

  Weaknesses

  The magnitude of the target price increase is smaller than for 0005.HK; non-banking NII may decline from the strong 1Q level.

  Comparison

  Also benefits from group-level NII upgrades and improved earnings forecasts.

  Risks

  European and global bank valuation, regulation, interest rate, and macro credit cycle risks.

Key data

• 2Q26 underlying pre-tax profit forecastUS$10.2bn+25% year over year, +2% quarter over quarter, and 4% above Visible Alpha consensus.
• 2Q26 banking NII expectation环比+3%Supported by higher HIBOR, more interest-accruing days, and balance sheet growth.
• 2026-2028 NII forecast revisions+0.4% / +2% / +2%Reflecting a higher interest rate environment and stronger rate outlook.
• 2Q26 credit cost forecast40bpsBelow 52bps in 1Q26, with no further overlay provisions expected related to the Iran/Middle East conflict.
• 1Q26 wealth management net new moneyUS$39bnIncluding US$34bn in Asia, above US$26bn in 4Q25 and US$23bn in 1Q25, creating a high-base pressure for quarter-over-quarter performance in 2Q.
• Share buyback forecastUS$1.5bnBuybacks are expected to resume with the 2Q26 results announcement, with CET1 ratio around 14.0%.
• EPS forecast revisionFY26-29E up to +1.6%Mainly driven by a more favorable interest rate outlook, partly offset by higher operating expenses.

Impact & implications

The report is positively skewed in its implication for HSBC's share price: the higher target price and maintained Buy rating indicate that Goldman Sachs believes improving rate conditions, NII resilience, normalized credit costs, and resumed buybacks can continue to support total returns. Near-term catalysts are 2Q26 results, whether 2026 NII guidance is revised upward, wealth management flow trends, and updates on China's cross-border regulation.

Risks

• HIBOR or the global interest rate environment comes in below expectations, weakening NII upside momentum.
• Changes in China's cross-border wealth management regulation may affect wealth inflows.
• The high base of 1Q26 wealth management net new money may lead to a quarter-over-quarter slowdown in 2Q.
• Higher expenses may offset part of the revenue improvement, especially with increased spending on growth projects and technology.
• If credit costs do not normalize as expected, PBT and capital return capacity may come under pressure.

What to watch

• HSBC 2Q26 results announcement on August 4.
• Whether management raises 2026 banking NII guidance.
• HIBOR trends and their lagged contribution to 3Q26 banking NII.
• Wealth management net new money, Asia wealth flows, and updates on China's cross-border regulation.
• Whether an approximately US$1.5bn share buyback is announced and whether the CET1 ratio is maintained.