What All You Need To Know About The HSBC Holdings PLC Stock (HSBA)?

  • Feb 25, 2019 GMT
  • Team Kalkine
What All You Need To Know About The HSBC Holdings PLC Stock (HSBA)?

Business Overview

HSBC Holdings provides banking and financial services worldwide. It offers various banking products and business operations spread across Asia, Europe, the Middle East, North Africa, North America and Latin America. As of January 14, 2019, the company operates in 66 countries with a worldwide employee base of more than 200 thousand employees. The company was established in 1865 and headquartered in London, the United Kingdom.

Key Segments

  • Retail Banking and Wealth Management (RBWM): This segment offers personal banking products and services, home loans and advances, insurance and investment products, credit cards, international services, savings products, and wealth solutions and financial planning services, just as an Internet, mobile banking and telephone services.
  • Commercial Banking (CMB): CMB segment includes working capital, term credits, payment services and worldwide exchange facilitation just as mastery in mergers and acquisitions, and access to financial markets.
  • Global Banking and Markets (GB&M): GB&M segment supports the government, corporate and institutional customers over the world.
  • Global Private Banking (GPB): GPB segment gives private banking, and speculation and wealth and investment management solution to entrepreneurs, business people, and senior employee and their families.

Key Management

  • Mark E Tucker (Group Chairman)
  • John M Flint (Group Chief Executive)
  • Ewen Stevenson (Group Chief Financial Officer)

Key Financials – FY 2018 ($ million)

(Source: Annual Report, Company Website)

 Financial Commentary

  • The group’s revenue in the financial year 2018 increased to $53,780 million against $51,445 million reported last year (FY 2017). With strong performance reported in all the business segments, revenue metric surged by 4.5 per cent.
  • In FY 2018, Operating Profit surged by 17.3 per cent to $17,354 million as compared to $14,792 million reported last year.
  • In 2018, reported Profit of the year was up by 26.5% to $15,025 million against $11,879 million reported last year, due to a surge in the income generated from Bank of Communication Company Limited (BoCom) and reduction in the taxes.
  • Reported EPS rose by 31.3 per cent in FY18 to $0.63p, reflecting higher operating profit and a lower tax rate.
  • In 2018, reported total assets surged by $36,353 million to $2,558,124 million against $2,521,771 reported last year, due to asset growth in the Asia region.
  • Shareholders equity reported in FY18 reduced by $3,997 million to $186,253 million as compared to the last year data.

Ratios

(Source: TR)

Ratios Commentary

  • The reported net interest margin in 2018 increased by 180 basis points to 1.66 per cent against 1.63 per cent reported last year.
  • Operating leverage of 4.4% for FY18 stood considerably higher than the industry median of 1.4 per cent.
  • The company’s reported fee revenue of 37.5% in 2018 stood below the industry median. From the previous 2 years, fee revenue has increased consistently.
  • In FY18, Loan growth stood at 1.9% which was remarkably lower than the industry median of 5.9%.

Recent News

On 14th January 2019, HSBC has settled more than three million Foreign exchange transactions and made over 150,000 payments worth USD 250 billion using DLT (distributed ledger technology).

Share Price Commentary

  • On 22nd February 2019, HSBC share closed at GBp 623.50, up by 0.06 per cent from its previous day closing price.
  • Stock’s 52 weeks High and Low is GBp 749.90/GBp 596.40. The stock was trading 16.86% lower than its 52w High and 4.54% higher than its 52w low.
  • Stock’s average traded volume for 5 days was 31,712,872.00; 30 days – 19,239,479.30 and 90 days – 21,508,222.69.
  • Average traded volume for 5 days was up by 64.83 per cent when compared with 30 days average traded volume.
  • At valuation front, the stock was trading at a Trailing-Twelve-Month (TTM) PE of 11.0x compared to the industry median of 9.3x.
  • The company’s stock beta was 0.97, reflecting relatively same directional movement as compared to the benchmark index.
  • Total outstanding market capitalization was around £124.93 billion and a dividend yield of 6.29 per cent. 

Growth Prospects and Risks Assessment

  • The company has delivered strong revenue growth in FY18 with an increase in the customer base and capital efficiency.
  • The company is planning for the UK's take-off from the EU to provide continuity for all the clients in the UK and Europe.
  • The company will stay alert to the downside risks current financial condition, particularly those identifying with the UK economy, global exchange tensions and the future way of loan costs.
  • The company will be proactive in overseeing expenses and investments to meet the risks to income development yet won't take short term decisions that would affect the long-term interests of the business.

Conclusion

With broad-based challenges which can be seen ahead of the group with Brexit uncertainties, trade tensions between the United States and China and the forward interest rates path uncertainty, the company has to remain alert and pursue proactive approach in managing cost base. With diversified business initiatives, strong customer base and favourable long-term revenue drivers, the market can keep a cautious watch on HSBC stock going ahead.

 

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