HSBC (HSBA) & Lloyds (LLOY): Are these banking stocks worth holding?

Highlights 

  • HSBC reported strong Q3 results today, as its profit after tax rose by US$ 2.2 billion to US$ 4.2 billion in Q3 2021
  • HSBC announced a US$2 billion buyback program due to a strong capital position
  • Lloyds is due to report its interim management statement later this week on 28 October

UK banking stocks have started announcing earnings after US banks kicked off a strong earnings season earlier this month amid rising deal making and deposits.

However, according to industry analysts, some British banks may have a slower release of their loan loss reserves due to some ongoing macro-economic headwinds affecting the UK economy.

A continuing supply chain crisis, rising energy prices and the end of certain pandemic related government schemes are expected to impact the UK’s path towards economic recovery.

Let us take a look at 2 FTSE 100 listed banking stocks and their investment prospects:

  1. HSBC Holdings PLC (LON: HSBA)

HSBC is a UK based global investment banking and financial services firm.

The company reported its Q3 2021 results today, with its profit after tax jumping by US$ 2.2 billion to US$ 4.2 billion, from US$ 2.039 billion in Q3 2020.

And, its Q3 2021 profit before tax rose by US$ 2.3 billion to US$ 5.4 billion, from US$ 3.074 billion in Q3 2020.  

The rise in profits was attributed to the expected release of credit losses and other impairment charges during the period and also from having a higher profit share from HSBC’s associates.

The group also said it intends to start a US$ 2 billion share buyback programme shortly backed by its strong capital position.

HSBC’s share price and volume

(Image source: Refinitiv)

HSBC’s shares were trading at GBX 439.10, up by 0.99 per cent on 25 October 21 at 10:01 AM BST. Meanwhile, the FTSE 100 index was at 7,243.27, up by 0.54 per cent.

The group’s market cap stood at £88,814.71 million, and it has netted shareholders 36.5 per cent return in the past one year as of 25 October 21.

  1. Lloyds Banking Group (LON: LLOY)

Lloyds is one of the largest British financial services institutions in the UK.

The group plans to close 41 Lloyds Bank branches and 7 Halifax branches across England and Wales between January and April next year due to an ongoing decline of customer visits in the group’s branches.

The move would bring the total number of closed branches by the group to nearly 150 branches, in the last 14 months.

The group had reported its H1 2021 statutory profit after tax at £3.9 billion. And its net income in H1 2021 was £7.6 billion.

The group is set to announce its interim management statement later this week on 28 October.

(Image source: Refinitiv)

Image description: LLOY’s share price and volume

Lloyds’ shares were trading at GBX 48.66, down by 0.14 per cent on 25 October 21 at 10:45 AM BST. Meanwhile, the banking sectoral index was at 3,086.76, up by 0.82 per cent.

The group’s market cap stood at £34,592.62 million, and it has netted shareholders 66.10 per cent return in the past one year as of 25 October 21.

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