Image source: Getty Images
Every time I take a look at HSBC Holdings (LSE: HSBA) shares, I’m surprised and disappointed that I don’t own them. They seem to have everything.
Looking for share price growth? The stock is up more than 30% over the last 12 months, and an eye-catching 170% across five years.
Seeking income? The FTSE 100 giant is forecast to yield 5.54% in 2025 and 5.89% in 2026. If that’s not enough, it just announced another bumper $3bn share buyback yesterday (31 July).
Perfect FTSE 100 stock?
Even its valuation looks tempting. The price-to-earnings ratio is just 9.95. The price-to-book ratio has ticked up to 1.21, but that’s far from expensive.
HSBC isn’t hamstrung by the sluggish UK economy either. This is a truly global bank, with most of its earnings coming from Asia.
Nobody’s perfect. Yesterday’s half-year numbers were unquestionably disappointing. Pre-tax profit plunged 27% to $15.8bn, dragged down by a $2.1bn impairment on its stake in China’s Bank of Communications, along with a $400m charge linked to weak demand for commercial property in Hong Kong.
Quarterly profit before tax dropped 29% to $6.3bn, below consensus forecasts of $6.99bn.
Matt Britzman at Hargreaves Lansdown said these numbers don’t tell the full story. Beneath the one-offs, adjusted profits actually beat expectations, helped by a strong wealth management performance. But he still warned: “The medium-term outlook is murky.”
The share price dipped 0.23% on the day, which suggests markets had already priced in some of the bad (and good) news.
Plenty of global risk
HSBC has sizeable exposure to China, and tensions over tariffs are flaring again. The board sounds cautious, warning that lending demand will stay subdued for the rest of 2025. Commercial property in Asia looks shaky, and the wider economic outlook cloudy.
Impairment provisions have risen. Net interest margins, a key profitability metric, slipped from 1.62% to 1.57%. That’s pretty thin and could narrow further if interest rates fall. Costs are also climbing due to restructuring and tech investment.
Despite all that, its balance sheet looks healthy. HSBC still has the firepower to support growth and keep rewarding shareholders.
Long-term hold
Its shift away from traditional banking towards wealth management, particularly in Asia, looks smart. HSBC is also targeting fast-growing markets such as India and Vietnam.
The building of economic links between Asia and the Middle East is another opportunity, given the group’s wide footprint. This will take time and ongoing investment though.
The market isn’t getting carried away. Analyst forecasts suggest the share price could climb to 950p over the next year, just 3% above today’s level. Add in the dividend, and the total return is more appealing. Hardly stellar though.
All those figures I quoted earlier are impressive, but they’re in the past. The future looks a little murkier. There could be more exciting opportunities elsewhere for now.
HSBC still has an awful lot going for it though. It’s well worth considering today, for investors who can look past its short-term challenges.
This story originally appeared on Motley Fool
