Rachel Reeves' financial cushion increases twofold in leaked budget document
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Nov 26 2025
0mins
Should l Buy HSBC?
Source: SeekingAlpha
Chancellor's Fiscal Boost: A leak from the Office for Budget Responsibility revealed that Chancellor Rachel Reeves increased the U.K.'s fiscal buffer to £22B from £9.9B, marking the highest level since March 2022, alongside a projected £29.8B rise in taxes.
Market Reactions: Following the leak, U.K. financial stocks saw gains in U.S. morning trading, with Barclays, HSBC, Lloyds, and NatWest all experiencing increases, contributing to a 0.8% rise in the FTSE 100 Index.
New Tax Measures: The leaked document proposed an additional tax on homes valued over £2M, a two-percentage-point increase in property and savings income taxes, and changes to pension contributions that will affect National Insurance Contributions starting in 2028.
Economic Forecast Adjustments: The OBR indicated that inflation is expected to be about half a percentage point higher than previously forecasted, while nominal GDP growth projections are only slightly lower than earlier estimates.
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Analyst Views on HSBC
About HSBC
HSBC Holdings plc (HSBC) is a banking and financial services company. Its business segments include Hong Kong, UK, Corporate and Institutional Banking (CIB), and International Wealth and Premier Banking (IWPB). Its Hong Kong business comprises retail banking and wealth and commercial banking of HSBC Hong Kong and Hang Seng Bank. Its UK business comprises UK retail banking and wealth (including first direct and M&S Bank) and UK commercial banking, including HSBC Innovation Bank. The CIB segment is formed from the integration of its commercial banking business (outside the UK and Hong Kong) with its global banking and markets business. The IWPB segment comprises premier banking outside of Hong Kong and the UK, its global private bank, and its asset management, insurance and investment distribution businesses. Its customers worldwide through a network covering 58 countries and territories. Its customers range from individual savers and investors to companies, governments and others.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- Profit Performance: HSBC reported a pre-tax profit of $9.4 billion for Q1, missing analysts' expectations of $9.59 billion primarily due to rising expected credit losses and other impairment charges, indicating economic uncertainty.
- Strong Revenue Growth: Despite the profit decline, HSBC's revenue increased by 6% year-on-year to $18.62 billion, exceeding estimates, driven by stronger wealth management fees and other income, showcasing the effectiveness of its diversification strategy.
- Rising Credit Losses: Expected credit losses rose to $1.3 billion, $400 million higher than the same period last year, primarily linked to exposure to a UK financial sponsor, reflecting economic pressures and uncertainties stemming from the Middle East conflict.
- Shareholder Return Plan: HSBC's board approved its first interim dividend of 10 cents per share for 2026, maintaining a target return on tangible equity of 17% despite potential impacts from the Middle East crisis, demonstrating confidence in future profitability.
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See More
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- Oil Price Fluctuations: Reports of a potential agreement between the U.S. and Iran led to a sharp decline in crude oil prices on Wednesday, although prices have stabilized since, as traders continue to monitor developments in the Middle East closely.
- Global Stock Market Rally: Global stocks are experiencing a relief rally, with Japan's Nikkei 225 index reopening after a holiday and surpassing 62,000 for the first time, driven by a 16% surge in Softbank shares, reflecting strong investor confidence in tech stocks.
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- Consumer Awareness Rise: Social media influencers are urging consumers to read labels, leading brands like Dabur and Mondelez to reduce sugar content; Dabur has cut sugar by 21% in its juices by 2023 and aims for an additional 20% reduction, highlighting the strong demand for healthier products.
- Rise of D2C Brands: The growth of social media is facilitating the rise of direct-to-consumer brands in India, posing a threat to traditional companies that fail to adapt, as experts indicate this trend will be a crucial lever for future personal care and food brands.
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- Credit Loss Impact: HSBC's expected credit losses and other impairment charges reached $0.52 per share in Q1, up from $0.38 a year ago and $0.36 in the previous quarter, indicating a deteriorating credit environment that may pressure future profitability.
- Profitability Decline: Pre-tax profit fell to $9.38 billion from $9.48 billion a year earlier, although it increased from $6.80 billion in Q4 2025, reflecting the adverse effects of higher credit losses and rising operating expenses on earnings.
- Weak Revenue Growth: Net interest income rose year-over-year to $8.95 billion but decreased from $9.20 billion sequentially, suggesting that changes in the interest rate environment are beginning to impact bank revenues, potentially affecting future revenue forecasts.
- Capital Ratio Decline: The common equity tier 1 capital ratio decreased to 14.0% from 14.9% in the previous quarter, indicating pressure on capital adequacy that may affect the bank's risk-bearing capacity and future growth potential.
See More
