Does the HSBC or Lloyds share price offer better value?

The HSBC (LSE:HSBA) share price has risen 17% since October 2025. This isn’t a bad result but there are 36 stocks on the FTSE 100 that have done better over the past 12 months.

There’s another popular banking share that’s also underperformed its peers. Indeed, the Lloyds Banking Group (LSE:LLOY) share price has risen by only 5% during the past year.

But which of these two is currently (5 November) the cheapest? Both have now released their third quarter results for 2026, so let’s take a closer look.

How do the numbers stack up?

During Q3, HSBC’s net interest income was 2% below consensus esimtates. Increased competition and a greater demand for deposit accounts paying a higher rate of interest were blamed.

Its net interest margin (NIM), the difference between the amount charged on loans less that paid on deposits, expressed as a percentage of interest-bearing assets, fell slightly compared to Q2. By contrast, Lloyds’ results were in line with forecast. Impressively, its NIM increased.

In terms of financial strength, HSBC has a common equity tier 1 (CET1) ratio of 13.9%, slightly better than Lloyds’ 13.3%. HSBC’s return on tangible equity for the nine months ended 30 September was 18% versus 17.9% for Lloyds. Importantly, both said they expected to deliver a full-year result in line with market expectations.

Not the same

However, we’re not comparing like with like here. In 2025, HSBC earned 77.6% of its operating profit outside the UK. In contrast, Lloyds generates nearly all of its revenue here. It’s therefore concerning that the latest forecast from the Office for Budget Responsibility has downgraded domestic GDP growth from 1.3% to 1% next year.

The two banks also have different business models. HSBC has a large wealth and private banking division whereas Lloyds is more focused on retail banking. As we’ve seen, this helps it achieve a higher NIM.

Popular valuation methods

Based on the price-to-earnings (P/E) ratio, Lloyds shares are more expensive. But the position’s reversed when the price-to-book (PTB) ratio’s used. HSBC’s yield (4.3%) is higher than Lloyds (4%). But analysts are expecting the latter’s dividend to grow much faster (no guarantees).

Final thoughts

To be honest, it’s a confusing picture. Both are well-managed and retain strong brands. Brokers reckon that HSBC’s shares are 20% undervalued and six out of 18 give the stock a Buy rating. For Lloyds, the figures are 27%, and 12 of 20 respectively.

If I had to choose between the two, I’d go for HSBC.

But I don’t want to buy either because I reckon Barclays (LSE:BARC) offers even better value. An analyst recently described it as the cheapest bank in Europe and “probably” the world.

It has the lowest P/E and PTB ratios of the FTSE 100’s banks. Indeed, brokers say its shares are 31% undervalued. In fact, none are advising their clients to sell.

And with a higher cost to income ratio than its peers (62% in Q3), there’s greater scope for it to reduce its overheads by embracing, for example, AI.

Its large trading division makes its earnings more volatile, and its dividend isn’t as generous as HSBC’s or Lloyds’. But with a CET1 ratio of 14.2%, a rapidly improving RoTE, and diverse business model, I think it’s one to consider.

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James Beard owns shares in Barclays plc.