Diving Deep Into One Of The Top Banking Stocks Of The UK – HSBC Holdings Plc

  • Oct 31, 2019 GMT
  • Team Kalkine
Diving Deep Into One Of The Top Banking Stocks Of The UK – HSBC Holdings Plc

HSBC Holdings Plc

HSBC Holdings Plc (HSBA) is a London, the United Kingdom based banking and financial services company and is a part of the Hong Kong and Shanghai Banking Corporation (HSBC) Group. The company is one of the largest entities within its sector serving more than 40 million customers globally, with an outreach and operations running across 65 countries globally. The company has four major divisions which are Commercial banking, Retail banking and wealth management, global private banking as well as Global banking and markets. The company’s commercial banking segment has a presence in approximately 53 countries, serving businesses of all sizes from small and medium term enterprises to multinational corporations, with around 1.5 million business clients leveraging HSBC Holdings’ services. In this segment, the company supports its customers by providing four major services, which include the likes of Global Trade and Receivables Finance, providing services like working capital and management of trade risk to both buyers and suppliers all around the trade cycle, Global Liquidity and Cash Management is another one of bank’s products, which enables the customers to manage their cash and receipts throughout the liquidity cycle and also supports in making easy and quick payments, The global banking service in the commercial banking segment provides various debt financing, equity financing advisory services to clients across the world. The bank was ranked number one in global trade finance by Euromoney in the year 2019. Its Insurance and Investments services provide companies with protection from financial and other business risks, trade insurance, employee benefits for the company’s employees all across the world, wealth and funds management and an array of other business risk assurance services.

Through its Retail Banking and Wealth Management segment, the company serves approximately 38 million customers across the countries it operates. The company provides five major services across this segment, which are HSBC Jade, which is for its special clients, delivering services like advanced wealth management solutions, tailored services, preferential pricing especially for High Net Worth Individuals (HNWI). This segment also includes Premier Banking, Personal Banking, Wealth Solutions and Financial Planning and International services for individuals. Global Private Banking provides Investment and Wealth Management services globally for the HNWI Clients of the company. The Global Banking and Markets segment provides Investment Banking and Capital Markets services that focuses on three sector groups which are basically Corporate Sector group, Financial Institutions Group, Resources and Energy group and engages in providing professional services in the scope of Advisory, Financing, Prime Services, Research and analysis, Security Services, Trading and Sales as well as Transaction banking.


HSBA Financial Performance (Third-quarter results for the quarter ended 30th September 2019)

On 28th October 2019, the company announced its earnings for the quarter and nine months ended 30th September 2019. The company highlighted that reported profit before tax (PBT) in the Asian region increased by 4 per cent year on year to US $4.7 billion in Q3 2019, with a robust and consistent performance in the Hong Kong area. It was reported that this increase was driven by both loans and advances to customers and customer accounts, which were reported to have risen by 4 per cent and 2 per cent respectively year on year in the reported results. In terms of the quarterly performance, the reported profit before tax (PBT) was down by 18 per cent year on year to US $4.8 billion in Q3 2019, as compared to a Profit before tax of US $6.194 billion in Q2 2019. The PBT for the reporting period also included part of the extra redressal provisions regarding PPI of approximately US $606 million and US $120 million of severance costs. The company also reported that the profit after tax for the third quarter ended 30th September 2019 declined by 24.50 per cent year on year to US $3.795 billion from US $5.027 billion in Q2 2019, which was a reflection of extremely difficult economic and political conditions around the world. The Return on tangible equity annualised (RoTE) for Q3 2019 was reported to be at 6.4 per cent. The company also highlighted that the Adjusted profit before tax declined by approximately 12 per cent to US $5.3 billion. In terms of the nine month performance, the reported profit before tax was at an increase of 4 per cent year on year to US $17.2 billion, which also included a $828 million profit related to dilution that was recognised in the Saudi region extra redressal provisions regarding PPI of approximately of US $1.2 billion as well as a US $407 million in severance costs. Adjusted profit before tax increased by around US $50 million to US $17.9 billion. The company reported a revenue increase of around 4 per cent. Adjusted revenue was also highlighted to have increased by 4.8 per cent, a reflection of robust performances in the Retail Banking and Wealth Management as well as the Commercial banking segments, especially in the first half the current year.

  Nine Months Ended   Quarter Ended
  30 Sep 2019 30 Sep 2018   30 Sep 2019 30 Jun 2019 30 Sep 2018
Reported results            
Reported revenue ($m)          42,727       41,085            13,355          14,944          13,798
Reported profit before tax ($m)          17,244       16,634               4,837             6,194             5,922
Reported profit after tax ($m)          13,732       12,932               3,795             5,027             4,516
Profit attributable to the ordinary shareholders of the parent company ($m)          11,478       11,071               2,971             4,373             3,899
Basic earnings per share ($)               0.57           0.56                 0.15               0.22               0.19
Diluted earnings per share ($)               0.57           0.55                 0.15               0.22               0.19
Return on average ordinary shareholders' equity (annualised) (%)               9.20           9.00                 7.00             10.50               9.60
Return on average tangible equity (annualised) (%)               9.50         10.10                 6.40             11.70             10.90
Net interest margin (%)               1.59           1.67        
Adjusted results            
Adjusted revenue ($m)          41,762       39,868            13,267          13,881          13,486
Adjusted profit before tax ($m)          17,864       17,814               5,348             6,101             6,092
Adjusted jaws (%)               2.20                  -2.40    
Adjusted cost efficiency ratio (%)             56.80         57.90               56.90             57.30             55.50
Expected credit losses and other credit impairment charges ('ECL') as % of average gross loans and advances to customers (%)               0.27           0.12                 0.34               0.22               0.20

Source: Company Website

HSBA Latest News

The company made a press announcement on 31st October 2019 that it will be cutting its best lending rate in the Hong Kong region for the first time since the world saw the global financial crisis unfold, by around 0.125 per cent or 12.5 basis points to 5 per cent, which will be effective from the next day, that is, 1st November 2019, Friday. George Leung, an advisor with the company, mentioned that the decision has been made in order to help companies in the Honk Kong area and increase spending as well as consumption in the city. The city has started facing its first recession since the global financial crisis and its aftereffects in 2008-09 following the protests happening in the city. The Hong Kong Monetary Authority also announced the cutting of interest rates by 0.250 per cent or 25 basis points to 2 per cent on the same day, only after the Federal Reserve announced its decision to cut rates by a similar margin.


HSBA Share Price Performance

On 31st October 2019, at 10:00 A.M. GMT, while writing, HSBC Holdings Plc’s share price was trading at GBX 581.70 per share, a decrease of 1.07 per cent or GBX 6.30 per share as compared to the previous day’s closing price, which was reported to be at GBX 588.00 per share. While writing, the HSBC Holdings Plc stock was trading 0.61 per cent above the 52-week low price, which was GBX 578.20 per share, set on August 28, 2019. This was also 15.41 per cent below the 52-week high price at GBX 687.7 per share, which the company’s stock set on May 03, 2019. The company’s market capitalisation was reported to be at GBP 119.130 billion.

By the time of writing, 3.43 million of the company’s shares had been traded in the market. The average volume of trading per day, for the last one year in the market, was 24.05 million stocks. The stock has reportedly lost 9.80 per cent in value in the last one year, from the price of GBX 644.9 per share. There has been a negative change in the last 6 months in the value of HSBC Holdings Plc’s stock of about 12.80 per cent from the price of GBX 667.1. The company’s stock has also reportedly lost 6.86 per cent in value in the last one month from the price of GBX 624.6.

The beta of the company’s stock has been reported to be at 1.0553. Through this, it can be inferred that the movement in the company’s stock is more volatile, in comparison to the movement of the benchmark market index.

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