Current Status of HSBC Shares
Current Status of HSBC Shares
HSBC's (NYSE: HSBC) share price has climbed by 32% in the year-to-date (YTD), outperforming the S&P500's 27% increase during the same period. However, Barclays' stock has seen an even more impressive rise of almost 70%. Let's explore the forces propelling HSBC's share price upward.
HSBC recorded robust earnings for the third quarter of 2024. Pre-tax profits soared to $8.5 billion from $8 billion in the same quarter the previous year. Interestingly, HSBC revenues hit $17 billion, representing a 5% increase year-over-year, predominantly fueled by customer interest in wealth products amid heightened market volatility. The trading and market-related sectors, including currency, stock, and bond markets, witnessed heightened activity. However, net interest income dipped to $7.6 billion, decreasing by $1.6 billion compared to the previous year, chiefly due to business disposals and increased interest expenses on liabilities. Operating expenses inched up by 2% to $8.1 billion as a result of increased technology spending and inflationary pressures.
Despite its consistent growth, HSBC has struggled to outpace the market on a regular basis. Its returns totaled 21% in 2021, 8% in 2022, and a strong 39% in 2023. In contrast, the Trefis High Quality Portfolio, containing 30 stocks, exhibits lower volatility and has outperformed the S&P500 annually throughout this period. How come? These portfolio stocks deliver better returns with lower risks compared to the benchmark index, as indicated by the performance metrics of the HQ Portfolio. Does HSBC appear to be an attractive investment for the future?
We remain bullish on HSBC, with a projected price of $52, slightly higher than the current market price. There are several contributing factors to our optimism. Initially, HSBC's valuation is reasonable, with the stock trading at approximately 1x tangible book value (company assets minus goodwill). Secondly, HSBC is seeking to reduce costs and enhance efficiency by reorganizing its business into four key sections while streamlining its geographic divisions into eastern and western markets. HSBC has also been intensifying its capital return program. Currently, its dividend yield exceeds 4%, and the bank recently announced a $3 billion share buyback for the last quarter, bringing its total buyback declaration for the year to approximately $9 billion. This could help bolster the share price. In addition, HSBC is targeting a mid-teens return on average tangible equity for 2024 and 2025, surpassing industry standards. Explore our analysis of HSBC's valuation for a closer examination of the forces propelling HSBC's share price.
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The robust earnings and revenue growth of HSBC, including a 5% increase in revenues to $17 billion, have been driven by customer interest in wealth products during market volatility. Despite HSBC's strong performance, the Trefis High Quality Portfolio, consisting of 30 stocks, has outperformed HSBC and the S&P500 annually due to lower risks and better returns compared to the benchmark index.