New Issue: Short, Safe and 2.02% – HSBC's New 2-Year SGD Senior Note

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• HSBC Bank plc is the UK-incorporated principal operating subsidiary of HSBC Holdings plc, one of the world's largest banking and financial services groups, offering commercial banking, personal banking, wealth management and investment services globally. The bank is launching a new 2-year Senior Unsecured SGD fixed rate note at a final price guidance (FPG) of 2.02%, with maturity due on 28 July 2028. The note carries an expected issue rating of A+ (S&P), in line with the issuer's own ratings of A1 / A+ / AA (Moody's / S&P / Fitch), reflecting its senior unsecured ranking. Notably, as the note is issued out of the operating company (OpCo), it ranks structurally ahead of debt issued by the holding company (HSBC Holdings), which typically carries ratings one to two notches lower. Our analysis below draws on the financials reported by HSBC Holdings; although these bonds are not guaranteed by the parent, we expect some form of support to HSBC Bank plc if necessary.

• HSBC's Q1 FY2026 (ending 31 March 2026) results came in broadly in line with expectations. Revenue excluding notable items rose 4% YoY to US$19.1 billion, driven by fee and other income, which climbed 6% YoY and surged 32% quarter-on-quarter to US$7.9 billion on particularly strong wealth management fees, with both Hong Kong and international wealth businesses benefiting from increased client activity. Banking net interest income softened sequentially from US$11.8 billion to US$11.3 billion but still recorded a modest 2% YoY increase. Pre-tax profit including one-offs edged down 4% YoY to US$9.4 billion, slightly below consensus of US$9.6 billion, as expected credit losses (ECL) rose from US$0.9 billion to US$1.3 billion — including a US$0.4 billion provision for a UK fraud case and an additional US$0.3 billion tied to Middle East conflict-related risks (higher oil prices, inflation, and slower growth).

• Importantly, the higher provisions largely reflect short-term geopolitical uncertainty and a deliberately prudent stance by management rather than any weakening in core credit quality. Underlying profitability remains robust, with Return on Tangible Equity (RoTE), excluding notable items, rising from 15.6% in 2024 to 17.2% in FY2025 and further to 18.7% in Q1 2026, while cost discipline is progressing well — underlying operating costs rose only about 1% YoY, with US$0.2 billion of annualised simplification savings already delivered against a US$1.5 billion total target. Looking forward, management raised its full-year 2026 net interest income guidance to approximately US$46 billion (from at least US$45 billion previously) on greater confidence in the interest rate environment and deposit margins. It reiterated its medium-term targets of 5% annual revenue growth by 2028, with RoTE above 17% each year.

• On the credit front, the group's Common Equity Tier 1 (CET1) ratio stood at 14.0% as of end-March 2026, down from 14.9% at end-2025 following the completed privatisation of Hang Seng Bank — an impact of approximately 120–125 basis points that management had already flagged. The ratio sits at the lower end of the 14.0%–14.5% target range but remains comfortably above the 11.2% regulatory requirement, and management has confirmed that share buybacks will pause until the ratio returns to target — a bondholder-friendly stance. Liquidity remains healthy, with the Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) at 135% and 142% respectively, both well above the 100% regulatory minimum as of 31 March 2026. At the same time, customer deposits of US$1.8 trillion against loans of US$1.0 trillion reflect a conservative balance sheet. Looking ahead, with buybacks paused, the CET1 ratio should rebuild toward the 14.0% - 14.5% target range over the coming quarters. Meanwhile, the group's ongoing strategic simplification — including completed disposals in the UK and Sri Lanka, and the announced sale of its Indonesia retail business — sharpens focus on core growth markets.

• For reference, HSBC Bank PLC (the bank, not the group) carries a CET1 ratio of 17.5%, an NSFR of 112% and a LCR of 142% as of 31 March 2026, comfortably above regulatory requirements.

• Overall, we think HSBC’s core banking franchise remains resilient, and we remain comfortable with the bank’s credit profile. In Table 1 below, we compare this new HSBC note against other senior unsecured SGD papers of similar tenors, available in the market. In general, we think this new issuance by HSBC is fairly priced, given HSBC’s quality banking franchise and decent credit profile. We note that the 2.02% FPG is broadly in line with the yields offered by the Middle Eastern banks (QNBK and FABUH), and similar to HSBC Holdings’ own 2029 note and Deutsche Bank’s 2028 note; though do be mindful that the latter two are priced to call. Against Singapore government securities of similar tenor, this new note provides a yield spread of 35 bps. Investors seeking quality short-term SGD income may consider the proposed issuance.

Table 1: Bond Comparison

Declaration: For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) holds a NIL position and the analyst who produced this report holds a NIL position in the abovementioned securities. This research report was prepared with the assistance of artificial intelligence (AI) tools. iFAST Financial Pte Ltd does not rely exclusively on AI for content generation; the content of this report – including all investment theses, ratings, price targets and conclusions – has been independently reviewed and verified by the research analyst(s) to ensure accuracy and professional integrity.