HSBC shares have collapsed by over 8%. I’d rush to buy

HSBC shares took a massive hit following the release of the bank’s 2023 results. This Fool now sees an opportunity to buy cheap shares.

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HSBC (LSE: HSBA) shares were the largest faller on the FTSE 100 yesterday (21 February) following the release of the bank’s results for the 12 months ended 31 December 2023.

On the surface, it seems like investors should be happy with the business’s performance. After all, it posted record profits. However, an 8.4% demise in its share price says otherwise.

Could this be a chance for me to snap up some cheap shares?

A quick earnings overview

Despite the negative market reaction, HSBC posted some strong numbers.

Profit before tax rose from $13.3bn to $30.3bn, representing a whopping 78% surge, while earnings per share (EPS) jumped from the $0.72 recorded in 2022 to $1.15 last year.

However, that doesn’t paint the full picture. While these results were impressive, they still come in below what many analysts had forecast.

For example, predictions had EPS placed at $1.32. Profit before tax was expected to be nearly $4bn higher. Net operating income also missed the mark.

Too cheap to ignore

But after its fall, I think HSBC is now too cheap to pass on.

Right now, I can pick up the shares trading on just 5.4 times earnings. That’s way below the FTSE 100 average of around 11. It’s also cheaper than a host of its competitors, including names such as Lloyds (7.6).

The bank also has a large focus on Asia. Hong Kong and mainland China make up over 50% of its revenues. Of course, this provides a risk, especially given HSBC’s exposure to a flagging Chinese property market as well as the nations ongoing tensions with the West. These could see the stock continue to struggle in the near term.

However, I think in the years ahead its focus on the region will pay dividends. It has earmarked $6bn of investment in Asia to 2025, targeting its wealth, commercial banking, and markets divisions. With Asia home to a host of growing and exciting economies, I see this as a smart move.

Passive income

I’m an investor that likes to target income. So, with its dividend rising to 61 cents per share for 2023 from 32 cents in 2022, I’m even more tempted by HSBC’s cheap price.

At current prices, that means it yields over 10%. That’s way above the FTSE 100 average of 3.9%. What’s more, it also announced its plan to launch a new $2bn share buyback programme expected to be completed in the first quarter.

I’m making a move

Naturally, there will be plenty of uncertainty and speculation surrounding HSBC in the coming days. But if there’s one thing I know for certain, it’s that I’m a Fool (with a capital F). I’m not one to be influenced by short-term swings in the market. Instead, I think of the bigger picture. I know this is the best way to aim to make handsome returns from the stock market.

As such, I’m not panicking. In fact, I’ve had HSBC on my watchlist for some time. I see its China woes as a short-term issue. And while I’d expect further volatility, I think its investments in Asia will bear fruit in the years to come.

I think now could be a smart time for me to swoop in and pick up some bargain shares. That’s exactly what I’ll be doing in the coming days.

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.

HSBC Holdings is an advertising partner of The Ascent, a Motley Fool company. Charlie Keough has positions in Lloyds Banking Group Plc. The Motley Fool UK has recommended HSBC Holdings and Lloyds Banking Group Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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