HSBC Holdings plc (HSBA.L) | Investment Case

1. Company Snapshot

1.a. Company Description

HSBC Holdings plc provides banking and financial services worldwide.The company operates through Wealth and Personal Banking, Commercial Banking, and Global Banking and Markets segments.The Wealth and Personal Banking segment offers retail banking and wealth products, including current and savings accounts, mortgages and personal loans, credit and debit cards, and local and international payment services; and wealth management services comprising insurance and investment products, global asset management services, investment management, and private wealth solutions.

This segment serves personal banking and high net worth individuals.The Commercial Banking segment provides credit and lending, treasury management, payment, cash management, commercial insurance, and investment services; commercial cards; international trade and receivables finance services; foreign exchange products; capital raising services on debt and equity markets; and advisory services.It serves small and medium sized enterprises, mid-market enterprises, and corporates.

The Global Banking and Markets segment offers financing, advisory, and transaction services; and credit, rates, foreign exchange, equities, money markets, and securities services; and engages in principal investment activities.It serves government, corporate and institutional clients, and private investors.HSBC Holdings plc was founded in 1865 and is headquartered in London, the United Kingdom.

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1.b. Last Insights on HSBA

HSBC Holdings' recent performance has been driven by several positive factors. The company's upgraded income outlook, citing slower-than-expected rate cuts in key markets, has contributed to investor optimism. Additionally, its Relative Strength Rating upgrade to 82, indicating strong price performance over the last 52 weeks, has also boosted investor confidence. Furthermore, HSBC's strong earnings prospects have led to an upgrade to a Zacks Rank #1 (Strong Buy). The company's plans to shift into a growth pattern with its takeover of Hang Seng Bank are also expected to have a positive impact.

1.c. Company Highlights

Last Price	1062
Change Percentage	-1.15%
Open	1075.8
Previous Close	1074.4
Market Cap ( Millions)	182484
Volume	10537838
Year High	1126.2
Year Low	698.7
M A 50	1047.06
M A 200	933.75

FCF Yield	0.00%
Dividend Yield	4.73%
ROE	9.95%
Debt / Equity	67.36%
Net Debt / EBIDTA	-405.25%
Price To Book	1.31
Price Earnings Ratio	13.29
Price To FCF	0
Price To sales	1.75
EV / EBITDA	4.4

2. HSBC Holdings plc Delivers Strong Q3 Results with Revenue Growth and Upgraded Guidance

HSBC Holdings plc reported a strong third quarter with total revenues growing $500 million to $17.9 billion. The company's annualized RoTE was 16.4% in the third quarter, or 17.6% year-to-date, excluding notable items. Profit before tax was $9.1 billion, and earnings per share came in at $0.2108, slightly below estimates of $0.256. The company's CET1 capital ratio is 14.5%, and it continues to target a dividend payout ratio of 50% of earnings per ordinary share, excluding material notable items.

Publication Date: Oct -29

                                    📋 Highlights
                                    Total Revenues Growth:
                                                Revenues rose by $500 million to $17.9 billion in Q3, driven by strong performance across divisions.
Wealth Management Growth:
                                                Fee and other income surged 29%, supported by insurance momentum and customer demand for investment products.
Deposit Balances:
                                                Customer deposits reached $1.7 trillion, reflecting $86 billion growth, including held-for-sale balances.
RoTE and Profitability:
                                                Annualized RoTE hit 16.4%, with profit before tax at $9.1 billion and a CET1 capital ratio of 14.5%.
2025 Guidance Upgrade:
                                                Banking NII target raised to $43 billion or better, with RoTE aimed at mid-teens or higher, underpinned by balance sheet momentum and structural hedge gains.

                                

Revenue Growth Drivers

The company's wealth management business had a good quarter, with 29% growth in fee and other income. Customer deposit balances stand at $1.7 trillion, with growth of $86 billion including held-for-sale balances. The insurance business also had a strong quarter, with 46% growth driven by model changes, experience variance, and economic factors. As Manveen Kaur noted, "the structural hedge also supports banking NII, leading to upgraded guidance."

Upgraded Guidance and Outlook

The company is upgrading its 2025 banking NII to $43 billion or better and its 2025 RoTE to mid-teens or better. The company expects banking NII to be no less than $10.6 billion in Q4, driven by balance sheet momentum, HIBOR, and structural hedge. The deposit franchise is strong across all markets, and the company is positive on deposit growth.

Valuation and Dividend Yield

With a Price-to-Tangible Book Value (P/TBV) of around 1.28, HSBC's valuation appears reasonable. The company's Dividend Yield stands at 4.81%, making it an attractive option for income-seeking investors. The ROE of 9.95% indicates a decent return on equity, although it may not be spectacular compared to some peers.

Asset Quality and Credit Exposure

Regarding Hong Kong CRE, the residential sector has stabilized, with a 2% year-to-date growth in the property index and increased transaction volumes. However, the office sector remains challenging. The portfolio is well-collateralized, with some expected slippage and modest ECL pickup. HSBC's direct exposure to private credit is single-digit billion dollars, with strong underwriting standards and a conservative approach to weaker counterparties.

3. NewsRoom

Top Analyst Reports for HSBC, Abbott & Shell

Dec -04

Source:

How HSBC’s Interim Chair Got the Job for Good

Dec -04

Source:

He Was Caught Up in the Financial-Crisis Firestorm. Now He Oversees HSBC.

Dec -04

Source:

Stifel to Shut UK Equities Trading Unit, Refocuses on Advisory Business

Dec -03

Source:

Boeing Rival Airbus, Zara Owner Inditex: Stocks Overseas in Spotlight

Dec -03

Source:

BOE Stress Test 2025: Have BCS, HSBC & Others Proved Resilience?

Dec -03

Source:

HSBC appoints Brendan Nelson as group chairman

Dec -03

Source:

HSBC snubs George Osborne to name ex-KPMG partner as chairman

Dec -03

Source:

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (5.61%)

6. Segments

Wealth and Personal Banking

Expected Growth: 5.5%

HSBC’s personal wealth management segment is driven by increasing high net worth individuals, growing demand for digital wealth management solutions, and strategic acquisitions, fostering a growth rate of 5.5%.

Corporate and Institutional Banking (CIB)

Expected Growth: 5.3%

HSBC's Corporate and Investment Banking segment benefits from increasing corporate financing activities, growth in emerging markets and increasing demand for digital banking solutions.

International Wealth and Premier Banking (IWPB)

Expected Growth: 6.2%

HSBC's global wealth and banking services for high net worth individuals will grow driven by increasing demand for wealth management, expansion in Asia, and growth in digital channels.

Corporate Centre

Expected Growth: 6.3%

HSBC's growth is driven by its strong presence in Asia, increasing digital banking adoption, and expanding wealth management business. The bank's diversified business model and efforts to improve cost efficiency are also expected to support growth.

7. Detailed Products

Retail Banking

Provides personal banking services to individuals, including current and savings accounts, credit cards, personal loans, and mortgages.

Wealth and Personal Banking

Offers investment and wealth management services, including insurance, pensions, and investments.

Commercial Banking

Provides financial services to small and medium-sized enterprises, including business lending, cash management, and trade finance.

Global Banking and Markets

Offers investment banking, markets, and securities services to corporate and institutional clients.

Global Private Banking

Provides wealth management services to high net worth individuals and families.

Transaction Banking

Offers cash management, trade finance, and securities services to corporate and institutional clients.

8. HSBC Holdings plc's Porter Forces

Forces Ranking

Threat Of Substitutes

HSBC's threat of substitutes is moderate due to the presence of alternative banking services and digital payment platforms. However, the complexity of banking services and the need for regulatory compliance limit the threat of substitutes.

Bargaining Power Of Customers

HSBC's customers have low bargaining power due to the bank's large customer base and diversified product offerings. Additionally, the complexity of banking services makes it difficult for customers to negotiate prices.

Bargaining Power Of Suppliers

HSBC's suppliers have low bargaining power due to the bank's large scale of operations and its ability to negotiate favorable terms with suppliers.

Threat Of New Entrants

The threat of new entrants is low due to the high barriers to entry in the banking industry, including regulatory requirements and the need for significant capital investments.

Intensity Of Rivalry

The intensity of rivalry in the banking industry is high due to the presence of several large players, including JPMorgan Chase, Bank of America, and Citigroup. HSBC faces intense competition in terms of pricing, product offerings, and customer service.

9. SWOT Analysis

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

	Value
Debt Weight	55.93%
Debt Cost	6.73%
Equity Weight	44.07%
Equity Cost	6.73%
WACC	6.73%
Leverage	126.89%

11. Quality Control: HSBC Holdings plc passed 1 out of 9 key points

Strong Liquidity

Low Deb

Strong Interest Coverage

Healthy Cash Flow

Operating Inefficiency

Strong Return On Equity

Consistent Revenue Growth

Consistent Operating Cash Flow Growth

Margin Improvement

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

HSBC

A-Score: 8.0/10

Value: 7.7

Growth: 7.3

Quality: 6.3

Yield: 8.8

Momentum: 9.5

Volatility: 8.7

1-Year Total Return ->

BBVA

A-Score: 7.8/10

Value: 7.1

Growth: 9.2

Quality: 7.0

Yield: 8.1

Momentum: 9.5

Volatility: 6.0

1-Year Total Return ->

NatWest

A-Score: 7.3/10

Value: 8.0

Growth: 5.6

Quality: 6.8

Yield: 8.1

Momentum: 9.0

Volatility: 6.7

1-Year Total Return ->

ING

A-Score: 7.2/10

Value: 6.4

Growth: 5.7

Quality: 5.0

Yield: 9.4

Momentum: 8.5

Volatility: 8.0

1-Year Total Return ->

Barclays

A-Score: 7.1/10

Value: 9.0

Growth: 7.2

Quality: 5.8

Yield: 5.0

Momentum: 9.5

Volatility: 6.0

1-Year Total Return ->

UBS

A-Score: 5.2/10

Value: 4.2

Growth: 4.0

Quality: 3.9

Yield: 5.6

Momentum: 7.0

Volatility: 6.3

1-Year Total Return ->

Peers Metrics

12.e Scoring ^Insights

12.f DCF ^BETA

Parameters

Short Term Growth

-9.74%

Short term Time

10.0

Long-Term Growth

2.00%

WACC

6.73%

HSBC Holdings plc - GB0005405286

1. Company Snapshot

1.a. Company Description

1.b. Last Insights on HSBA

1.c. Company Highlights

Fairly Valued

Average Yield

Medium Volatility

Earnings Beats

Revenues Miss

Cheaper

Revenues Beats

Average Quality

Stable Momentum

Strong Momentum

Lower Quality

Higher Yield

Higher Growth

2. HSBC Holdings plc Delivers Strong Q3 Results with Revenue Growth and Upgraded Guidance

Revenue Growth Drivers

Upgraded Guidance and Outlook

Valuation and Dividend Yield

Asset Quality and Credit Exposure

3. NewsRoom

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (5.61%)

6. Segments

Wealth and Personal Banking

Expected Growth: 5.5%

Corporate and Institutional Banking (CIB)

Expected Growth: 5.3%

International Wealth and Premier Banking (IWPB)

Expected Growth: 6.2%

Corporate Centre

Expected Growth: 6.3%

7. Detailed Products

Retail Banking

Wealth and Personal Banking

Commercial Banking

Global Banking and Markets

Global Private Banking

Transaction Banking

8. HSBC Holdings plc's Porter Forces

Forces Ranking

Threat Of Substitutes

Bargaining Power Of Customers

Bargaining Power Of Suppliers

Threat Of New Entrants

Intensity Of Rivalry

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

11. Quality Control: HSBC Holdings plc passed 1 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

10.62$

Current Price

10.62$

Potential

-0.00%

Expected Cash-Flows

12.e Scoring ^Insights

12.f DCF ^BETA