HSBC (LSE:HSBA) shares are up 17.7% over the past six months. And that means £10,000 invested then would now be worth £11,700. Factoring in half an annual dividend, the total return would be close to 20%. Clearly, that’s a very strong return over a relatively short period of time.
However, would an investment today be a shrewd one? Let’s take a closer look.
Not cheap compared to peers
HSBC’s currently trading at 9.5 times forward earnings for 2025, with this multiple projected to decline to 8.7 times in 2026 and further to eight times in 2027. This places HSBC at a modest premium compared to some of its UK-focused peers, which often trade at lower multiples due to their more limited international exposure and, in some cases, lower profitability.
According to the metric, the market appears willing to pay a little more for HSBC shares, likely reflecting the bank’s global reach, diversified revenue streams, and strong capital position. While this makes HSBC a little more expensive on a forward price-to-earnings (P/E) basis, the difference isn’t dramatic.
One of HSBC’s most attractive features for investors right now is its dividend. Dividend per shares are forecasted to come in at $0.67, $0.70, and $0.77 for 2025, 2026, and 2027 respectively. This translates into a dividend yield of 5.6% in 2025. This rises to 5.9% in 2026 and a healthy 6.5% in 2027.
The payout ratio’s expected to remain stable, hovering just above 50%. This suggests the dividend’s well-covered by earnings and sustainable even if profits come under some pressure.
However, I’d really emphasise that there currently isn’t that much between the valuation of FTSE 100 banks. Factoring in growth and dividends to the P/E ratios, they’re all broadly trading in line. HSBC’s dividend is actually a little higher than several of its UK-focused peers.
Operational strength and trade challenges
Recent results underscore HSBC’s operational strength. Net income is set to remain elevated, return on tangible equity is in the mid-teens, supporting both capital growth and shareholder distributions.
The bank’s global footprint however, does expose it to macroeconomic and geopolitical shocks. Trump’s trade policy has introduced a great deal of volatility and the bank has significant exposure to both the US and China. This volatility is a reminder that while HSBC’s international presence is a source of strength, it can also amplify market swings when global trade tensions flare.
I actually feel like HSBC has gone under the radar to some extent in recent weeks. Nonetheless, it still looks like an interesting prospect for dividend investors.
However, as with the rest of the UK banking sector, I’m not buying HSBC shares any time soon.
My exposure to the sector’s already considerable. And the current valuations don’t leave a huge amount of room for appreciation, unless we see a broader revaluation of British financials.
