Why I Love HSBC Holdings Plc

The big banks may be unloved, but Harvey Jones says there is still plenty to like about HSBC Holdings plc (LON: HSBA).

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

There is something to love and hate in most stocks, but today I’m feeling the love for HSBC Holdings (LSE: HSBA) (NYSE: HBC.US). Here are five reasons why.

Its share price has struggled lately

I like buying stocks after their share price has fallen, rather than risen. So I’m intrigued to see HSBC is down 8% over the last three months. The dip can be partly pinned on a mixed set of interim results, which included a 7% fall in group revenues to $34.37 billion. But there was good news in there as well, including a 10% rise in pre-tax profits to $14.1 billion, and bad debts and other credit risk provision down 35% to $3.1 billion. Its capital position also strengthened. I smell a buying opportunity.

China is still growing

Another reason for the fall in HSBC’s share price is management caution over China. It recently warned that growth would slow to 7.4% in 2013 and 2014, below the Chinese government’s own target. But growth figures in today show the economy still rattling along at a better-than-expected 7.8%, which gives grounds for optimism. HSBC should also be a beneficiary when the the West starts seriously growing again.

HSBC is sharpening up its act

HSBC is making good progress in its bid to reduce its sprawling complexity. It has sold or closed 11 non-strategic businesses so far this year, taking the total to more than 50 since the beginning of 2011. All the banks need to tidy up their act, and I’m glad HSBC is doing its bit. This should also make it a little easier for investors to understand what they are buying.

It’s a big bank that yields 4.11%

Investors are waiting to see how and when the government will sell off its stake in Lloyds Banking and RBS, and when those banks will be free to resume their dividend payouts. We’re also waiting to see when Barclays will fully restore its dividend. Investors in HSBC have no such worries. The board recently declared a second interim dividend of 10 cents per share. It yields 4.11% at today’s prices, roughly double the Barclays yield of 2.11%. It is also comfortably above the FTSE 100 average of 3.5%. This makes it a tempting target for income seekers.

Gulliver’s travails won’t last forever

Love is too strong a word to use about any bank these days. HSBC is far from perfect, having been embroiled in drugs cartel money-laundering, PPI mis-selling and Libor fixing. But it is still one of the most profitable banks in the world with a comfy financial cushion: its Core Tier 1 ratio hit 12.7% at 31 March, up from 12.3%. Better still, chief executive Stuart Gulliver has been with the bank since 1980, and is committed to restoring the bank’s good name and glory days. I’m confident he will get there in the end. Credit Suisse expects HSBC to outperform its sector, with a target price of £7.80. Today, you can buy it for £6.77. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

> Harvey owns shares in RBS.

 

More on Investing Articles

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »

Investing Articles

Are HSBC shares a FTSE bargain? Here’s what the charts say!

There are plenty of dirt-cheap FTSE 100 banking stocks for investors to choose from today. Our writer Royston Wild believes…

Read more »