First-quarter 2026 results highlighted how fee, wealth and insurance income offset weaker net interest margins (NIMs) across major markets. Policy divergence widened, with Australia raising rates while Malaysia holds steady. Meanwhile, both the Hong Kong Monetary Authority (HKMA) and European Central Bank (ECB) expressed caution on stablecoins, underscoring regulatory challenges.

1. FSB warns on bank-private credit interlinkages as the market reaches $2 trillion

The Financial Stability Board (FSB) published on 6 May a report on vulnerabilities in private credit, sizing the market at between $1.5 trillion and $2 trillion at end-2024 and flagging deepening interconnections with banks, insurers and private equity firms as the principal stress-transmission channel. Drawn and undrawn bank credit lines to private credit funds totalled $220 billion on FSB figures, with commercial data suggesting the true figure could be twice as large. Synthetic risk transfers, collateralised loan obligation (CLO) warehouse financing and credit-linked notes were named as further exposure routes. The United States accounts for around $1 trillion of the market, with smaller pools in the euro area, the United Kingdom, Hong Kong, Japan and Singapore. The report frames private credit as untested in a prolonged downturn.

2. ECB’s Lagarde warns euro stablecoins risk financial stability and policy transmission

Christine Lagarde, president of the ECB, expressed scepticism about the role of euro-denominated stablecoins in Europe’s financial future. Speaking at the Banco de España LatAm Economic Forum on 8 May, Lagarde warned that stablecoins could undermine the transmission of monetary policy and pose risks to financial stability, particularly if they lead to a migration of deposits from traditional banking systems to private digital tokens. She also stated that stablecoins were “not an efficient way” to enhance the euro’s global role, emphasising the ECB’s focus on developing central-bank-backed digital solutions, such as the Pontes and Appia projects, to provide more secure and reliable alternatives to private tokens.

3. European banks show strength in wealth and fee income

Intesa Sanpaolo, UniCredit, Eurobank and Commerzbank all reported strong first-quarter results driven by fee income, wealth and insurance. Intesa Sanpaolo posted a record net income of EUR 2.8 billion ($3.03 billion), up 6% year-on-year, with operating income hitting EUR 7.2 billion ($7.79 billion), largely driven by fees and insurance. UniCredit’s non-interest income rose 8% to EUR 2.5 billion, while Eurobank saw a 19.9% increase in fee and commission income to EUR 203 million, led by lending and wealth management. Commerzbank also posted a record quarter with net commission income up 9% to EUR 1.1 billion, demonstrating operating leverage through cost discipline and fee growth.

4. HSBC’s record returns meet $1.3 billion credit charge

HSBC reported on 5 May first-quarter profit before tax of $9.4 billion, broadly flat year-on-year, as stronger revenue was offset by a $1.3 billion expected credit loss charge. RoTE excluding notable items reached 18.7%, described by chief financial officer Pam Kaur as the best in 20 years, supported by Hong Kong’s 44.7% segment RoTE, wealth fee growth and deposit franchise gains. Wealth fee and other income rose 15% to $2.7 billion, while banking NII rose $0.7 billion year-on-year to $11.3 billion. The credit charge included a $0.4 billion fraud-linked securitisation exposure and a $0.3 billion Middle East-related reserve build. HSBC also confirmed the sale of its Indonesia retail wealth and premier banking business to OCBC.

5. RBA hikes 25 basis points to 4.35% in third consecutive increase

The Reserve Bank of Australia's (RBA) Monetary Policy Board voted 8 to 1 on 5 May to lift the cash rate by 25 basis points to 4.35%, the third consecutive hike of 2026. The board cited materially heightened uncertainties about domestic activity and inflation, and a baseline forecast that sees underlying inflation peaking higher than projected in February. Headline inflation reached 4.6% in the year to March. The board flagged second-round effects from higher fuel prices flowing into goods and services pricing. Commonwealth Bank of Australia raised variable home loan and bank account rates by 25 basis points the same day, effective 22 May. The RBA's stance places Australia at the opposite end of the global rate cycle from the ECB, Federal Reserve and Bank of England, with implications for cross-currency funding costs across Asia Pacific franchises.

6. HKMA launches Cargox trade finance pilot and signals gradual stablecoin rollout

The HKMA announced on 7 May the launch of the Cargox Pilot Programme with 21 participating banks, building on the Commercial Data Interchange to integrate cargo and trade data into trade finance underwriting for SMEs. The programme covers four areas through 2026 to 2027: integration with cargo and trade data platforms, multi-dimensional credit assessment combining trade flow and cash flow data, Digital Corporate Identity for trusted data sharing, and connectivity with key trade corridors. On 5 May, HKMA chief executive Eddie Yue and deputy chief executive Darryl Chan confirmed that licensed stablecoin issuers HSBC and Anchorpoint must pass system, risk, staff and external checks before launch, with further licences contingent on market and risk conditions. Both announcements develop the regulated bank infrastructure that frames Hong Kong's digital finance hub strategy.

7. OCBC delivers record income on wealth fees while acquiring HSBC Indonesia franchise

OCBC reported on 8 May first-quarter net profit of SGD 1.97 billion ($1.46 billion), up 5% year-on-year, with non-interest income reaching a record SGD 1.61 billion ($1.19 billion) and wealth fees rising 34% to SGD 422 million ($312 million). NIM compressed 28 basis points year-on-year to 1.76% as benchmark rates eased, which the wealth income more than offset. Four days earlier, on 4 May, OCBC Indonesia agreed to acquire HSBC Indonesia's International Wealth and Premier Banking business, adding SGD 6.6 billion ($4.9 billion) in AUM and 336,000 customers for a premium of up to SGD 480 million ($355 million). The transaction is the first major regional acquisition under group CEO Tan Teck Long, building on the 2024 PT Bank Commonwealth purchase.

8. UOB profit dips YoY on NIM pressure as Citi integration becomes fee-income lever

UOB reported on 7 May first-quarter net profit of SGD 1.44 billion ($1.06 billion), down 4% year-on-year and up 2% quarter-on-quarter. NIM narrowed to 1.82% from 2.00% a year earlier and net fee income of SGD 637 million ($470 million) rose 2% quarter-on-quarter on wealth and loan-related fees. Credit costs of 26 basis points held within the 25 to 30 basis point full-year range and the NPL ratio was unchanged at 1.5%. Full-year guidance was reaffirmed at low single-digit loan growth and NIM of 1.75% to 1.80%. With Citibank integration largely complete, UOB seeks to convert its enlarged 8.5 million ASEAN customer base into recurring fee income across wealth, cards, trade and cash management. The bank is targeting a doubling of wealth income by 2030 from its 2025 base.

9. Bank Negara holds OPR at 2.75% for a sixth consecutive meeting

Bank Negara Malaysia's Monetary Policy Committee (MPC) maintained the overnight policy rate (OPR) at 2.75% on 8 May, the sixth consecutive hold since the July 2025 cut. The MPC described the policy stance as "appropriate and consistent with the outlook of continued price stability and sustainable economic growth." Headline and core inflation averaged 1.6% and 2.1% respectively in first-quarter 26, within Bank Negara's 1.5 to 2.5% range. The committee acknowledged that the Middle East conflict had increased downside risks to growth and upside risks to inflation while highlighting Malaysia's net energy exporter position as a partial buffer. Economists including Public Investment Bank, RHB Research and HSBC expect the OPR to remain at 2.75% through 2026, leaving Malaysian banks with funding cost stability into the second half of the year.

10. CBN forces Nigerian banks into balance-sheet reset over Nestoil exposures

The Central Bank of Nigeria (CBN) has prohibited banks under forbearance from paying 2025 dividends until NPLs fall below 5%, forcing reclassification of previously restructured loans. A NGN 2.9 trillion ($2 billion) Nestoil exposure is among the most significant pressures on five affected lenders, whose combined impairment charges reached NGN 2.16 trillion ($1.5 billion). A separate CBN cap on overseas equity at 10% of shareholders' funds has prompted Access Holdings — parent of Nigeria's largest bank by assets and operator across more than 20 countries — to begin a 12-month sell-down of foreign subsidiary stakes, with current exposure at 19.4% of shareholders' funds, nearly double the new ceiling.

What to watch: Senate full-floor vote on Kevin Warsh as Federal Reserve chair (week of 11 May, ahead of Powell's term end on 15 May); SMFG full-year FY2025 results (13 May); MUFG full-year results (15 May); Mizuho full-year results (15 May); Maybank, CIMB and RHB Bank's first-quarter results (end-May).

The Asian Banker Weekly Brief is a roundup of the biggest macroeconomic, industry and regulatory developments affecting banking globally.