Shares in HSBC (LSE: HSBA) have struggled to gain traction since the financial crisis. After hitting a low of around 370p back in 2009, the bank shares quickly recovered to 740p by the end of the year before steadily grinding lower over the next few years to a low of 470p in 2011 when the European debt crisis hit the headlines. 

After recovering from the European debt crisis, shares in HSBC went on to rally to a multi-year high of 760p, the highest level since 2008. However, since touching this high in 2013 HSBC’s shares have pushed lower every year, and now trade at a level not seen since the financial crisis.

HSBC is quite clearly in better shape than it was back in 2008, as is the wider global financial system. So why are the bank’s shares trading at a level that would suggest complete economic anarchy? Is there a chance they’ll ever recover to the levels seen back in 2013?

Huge changes 

There’s no doubt that HSBC has changed significantly over the past decade. The bank has withdrawn from numerous non-core markets, has cut tens of thousands of jobs and has recently embarked on a drive to cut more than $200bn of risk-weighted assets from its balance sheet. 

These initiatives have made the bank smaller, which could explain some of the declines, although while HSBC has been shrinking itself, profits have remained relatively consistent. 

For example, back in 2011 HSBC reported a pre-tax profit of around £15bn, for full-year 2015 the bank reported a pre-tax profit of £13bn, a decline of around 13% compared to a 26% fall in bank share price over the same period. City analysts currently expect HSBC to report a pre-tax profit of around £12bn for full-year 2016, which could explain a bit of the decline. Investors could be selling off the bank in anticipation of further revenue and profitability declines.

Still, over the past five years, HSBC has become a FTSE 100 dividend stalwart. The bank kept its dividend payout steady for the previous five years and over the period shares in HSBC have supported average dividend yield of around 5% — one of the most attractive yields in the UK’s leading stock index.

However, over the same period, a worrying trend has developed. HSBC’s dividend cover, the number of times a company’s dividend payout is covered by earnings per share, has declined from around 2.2 times to 1.3 times today. 

If the bank increases its dividend payout next year at the same rate it has done in the past, City analysts expect the payout cover will fall to 1.2 times—that’s dangerously close to the level many analysts would consider unsustainable.

The bottom line

So overall, while HSBC’s dividend yield of 8% may seem attractive, unless the bank’s profits suddenly reversed course and start expanding again, it’s unlikely shares in HSBC will return to 700p any time soon.

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Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has recommended HSBC Holdings. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.