HSBC and Standard Chartered are the most exposed among major European banks to the ongoing conflict in the Middle East, potentially pressuring earnings, J.P. Morgan cautioned on Thursday. This assessment comes as the STOXX 600 Banks index has already seen a decline of nearly 6% since late February. HSBC shares dropped over 5% on Thursday, while Standard Chartered fell more than 2%.
J.P. Morgan anticipates that rising energy costs will affect corporate lending exposure, especially across sectors such as agriculture, manufacturing, construction, and transport. Excluding Turkey and Egypt, the brokerage forecasts Middle East exposure for Standard Chartered’s revenue and profit before tax (PBT) to be approximately 8% and 12%, respectively. For HSBC, it estimates revenue and PBT exposure at about 4%. However, the brokerage sees earnings pressure as the primary risk rather than credit losses, given that their Middle East portfolios are concentrated among high-rated corporates.
J.P. Morgan estimates HSBC’s Middle East lending exposure, largely comprising the UAE and Qatar, at about $23 billion for fiscal 2025, representing about 2% of its total loan portfolio. Standard Chartered has disclosed approximately $9 billion of loans to the UAE in fiscal 2025, equivalent to nearly 2% of its total loan book. Other European banks, including Julius Baer, Societe Generale, ING, Barclays, Banco Santander, BNP Paribas, and Deutsche Bank, have limited exposure, with less than 1% for both revenue and profit.
Separately, UBS Global Wealth Management downgraded European banks to “neutral” on Wednesday, citing limited scope for sustained gains beyond an initial rebound, even if energy flows are quickly restored. Julius Baer is a Swiss private banking and wealth management group. HSBC is a British universal bank and financial services company.
