A banking giant has been rocked by a £960million blow after losses tied to bad debts and a UK fraud scandal dented its quarterly results.
HSBC revealed the hit pushed first-quarter profits below what analysts had expected, despite the lender still posting strong overall earnings.
The bank's pre-tax profits came in at $9.4billion (£6.96billion), falling slightly from $9.5billion (£7billion) during the same period last year.
Shares in the banking group dropped five per cent during Tuesday morning trading as investors reacted to the disappointing figures.
The expected credit loss charge of $1.3billion (£960million) represented a 50 per cent jump compared with a year earlier, the bank confirmed.
A large chunk of the losses came from a surprise $400 million (£295million) hit linked to a fraud case in the UK.
The money was tied to loans HSBC had made to a private equity firm, which was connected to another lender in its corporate banking division.
The bank has not revealed which companies were involved.
On top of this, HSBC put aside $300million (£222million) due to what it described as "heightened uncertainty" surrounding the Iran war and its effect on the economic outlook.
The lender also pointed to higher trade tariffs as another factor weighing on its bad debt provisions.
The lender also pointed to higher trade tariffs as another factor weighing on its bad debt provisions
| GETTYHSBC maintained that its exposure to the private credit sector remained limited when measured against its total balance sheet.
HSBC is not alone in facing such pressures, with fellow British lenders also booking substantial charges amid a darkening economic picture.
Barclays announced an £823million provision for bad debts in its own first-quarter results last week.
Much of that sum was driven by a £228million impairment linked to the collapse of UK property lender Market Financial Solutions earlier this year, which itself faced fraud allegations.
The Iran war has prompted downgrades for the UK's economic prospects, forcing banks across the sector to set aside more money for potential losses
| GETTYLloyds Banking Group has similarly increased its credit charges as it takes a more cautious view of the economy.
The Iran war has prompted downgrades for the UK's economic prospects, forcing banks across the sector to set aside more money for potential losses.
Regulators are growing increasingly worried about private credit markets as a source of financial risk, both domestically and globally, given the complexity involved in such lending.
Despite the challenges, HSBC's revenues climbed sox per cent year on year to reach $18.6billion (£13.7billion), with wealth management and its Hong Kong operations driving the growth.
Despite the challenges, HSBC's revenues climbed sox per cent year on year
| PAThe lender is also making headway on cutting costs, having already trimmed $1.4billion (£1.03billion) in expenses and remaining on track to hit its $1.5billion (£1.1billion) annual savings target by June, six months ahead of schedule.
Chief executive Georges Elhedery said: "In periods of greater uncertainty, customers turn to us more as their trusted partner to navigate complexity with the financial strength, stability and expertise they know they can rely on."
Chris Beauchamp, chief market analyst at IG, noted the Hormuz crisis "looms large in the results, casting a shadow over an otherwise solid set of numbers."