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HSBC Holdings PLC HSBA

Morningstar Rating
GBX 610.86 +1.36 (0.22%)
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Company Report

HSBC Earnings: Cost Concerns and Unexpected Impairment Disappoint Market; We Remain Buyers

HSBC's December-quarter operating performance was largely in line with our expectation but an unexpected impairment of $3 billion led to full-year 2023 net profit of $22.4 billion falling 10.8% short of our estimate. However, the market is reacting negatively given an operating miss to consensus estimates. We also note some disappointment over guidance that costs will rise by 5% in 2024. This is counter to most banks indicating that they are striving to keep costs down. HSBC indicates a lagging inflation impact is hitting them. Nonetheless, we don't see significant changes to our profit forecast for HSBC, as higher fee and noninterest income and stable net interest margin, or NIM, compensate for the rise in costs. With minimal change to our profit forecast, our fair value estimate is unchanged at GBX 850, $51 per ADR, and HKD 80. HSBC remains inexpensive at around 1.13 times 2024 price/book and ROE averaging around 12% through 2028.

Price vs Fair Value

HSBA is trading at a 28% discount.
Price
GBX 609.50
Fair Value
GBX 918.00
Uncertainty
Medium
1-Star Price
GBX 8,958.50
5-Star Price
GBX 714.00
Economic Moat
Ypy
Capital Allocation
Hyhfpkcj

Bulls Say, Bears Say

Bulls

HSBC has cost advantages and significant intangible assets in its core market of Hong Kong that help it generate strong earnings there even when the local economy is weaker.

Bears

HSBC has operations in many jurisdictions around the world, including some where it is a secondary player and doesn't enjoy the same advantages that it does in core markets like Hong Kong.

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News

Trading Information

Previous Close Price
GBX 609.50
Day Range
GBX 606.20620.50
52-Week Range
GBX 512.30665.60
Bid/Ask
GBX 584.00 / GBX 625.00
Market Cap
GBX 11.65 Tril
Volume/Avg
48.6 Mil / 36.9 Mil

Key Statistics

Price/Earnings (Normalized)
2.63
Price/Sales
2.36
Dividend Yield (Trailing)
6.96%
Dividend Yield (Forward)
6.96%
Total Yield
10.02%

Company Profile

Established in 1865 in Hong Kong, London-based HSBC is one of the largest banks in the world, with assets of USD 3 trillion and 40 million customers worldwide. It operates across 64 countries with around 220,000 full-time staff. Key regions include Asia, Europe, the Middle East and North Africa, and North America. The United Kingdom and Hong Kong are the two largest markets for the bank. The bank offers retail, commercial and institutional banking, global banking and markets, wealth management, and private banking.
Sector
Financial Services
Industry
Banks - Diversified
Stock Style Box
Large Value
Total Number of Employees
220,861

Competitors

Valuation

Metric
HSBA
D05
C
Price/Earnings (Normalized)
2.638.1510.76
Price/Book Value
0.891.390.56
Price/Sales
2.364.261.37
Price/Cash Flow
7.557.634.15
Price/Earnings
HSBA
D05
C

Financial Strength

Metric
HSBA
D05
C
Quick Ratio
Current Ratio
Interest Coverage
Quick Ratio
No chart available

Profitability

Metric
HSBA
D05
C
Return on Assets (Normalized)
0.79%1.10%0.41%
Return on Equity (Normalized)
13.76%13.88%5.31%
Return on Invested Capital (Normalized)
Return on Assets
HSBA
D05
C
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Banks - Diversified Industry Comparables

Ticker
Name
Morningstar Rating for Stocks
Economic Moat
Market Cap
JPM
JPMorgan Chase & CoBrldg$531.1 Bil
BAC
Bank of America CorpQybm$270.1 Bil
WFC
Wells Fargo & CoQvc$195.8 Bil
HSBC
HSBC Holdings PLC ADRRbysg$147.3 Bil
RY
Royal Bank of CanadaGyxn$136.1 Bil
MUFG
Mitsubishi UFJ Financial Group Inc ADRKmcv$119.8 Bil
TD
The Toronto-Dominion BankQmv$106.6 Bil
C
Citigroup IncMwbj$105.2 Bil
UBS
UBS Group AGVsjmmnz$91.9 Bil
SAN
Banco Santander SA ADRDnhyhh$66.2 Bil

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