HSBC (LSE: HSBA) shares are smashing it. They’re up almost 50% in the last year, and 190% over five. Can they keep up this blistering pace?
When I looked at the Asia-focused bank’s prospects at the start of this run, I was divided. While it had a huge opportunity in China, I feared it would get squeezed in the superpower conflict with the US. The FTSE 100 bank fixed that pretty neatly by dividing into two geographic segments, and it’s been flying ever since.
I’d be kicking myself, but happily I have exposure to the sector via Lloyds Banking Group, which has also been pretty nifty.
FTSE 100 banks are all flying
All the big banks have benefited from higher global interest rates, which allow them to widen the spread between what they charge borrowers and pay savers, boosting net income and profits.
HSBC has also been doing a bit of streamlining, exiting lower return markets in Canada, the US and Europe. It now generates roughly half its profits from Asia, primarily Hong Kong and mainland China, and got a further boost from by last year’s emerging markets recovery.
China remains a huge opportunity, although the country’s property and shadow banking sectors remain a worry, and superpower tensions haven’t gone away.
It’s a sprawling £205bn operation, and threats can pop up from anywhere. Investors had got used to super-generous share buybacks, but these have now been suspended for three quarters from 9 October 2025, to pay for buying out minority investors in Hong Kong lender Hang Seng.
Later that month, Q3 profits slipped $1.1bn after HSBC lost an appeal in a long-running Luxembourg lawsuit over Bernard Madoff’s multibillion-dollar Ponzi scheme. Only last week, HSBC had to pay French authorities nearly €300m to settle a dividend fraud case over practices that ceased more than six years ago. Luckily, it has the financial strength to sail through these issues. That’s the joy of making a $32.3bn profit before tax as HSBC did in 2024 (up $2bn on the year before).
Dividends and buybacks
HSBC did report a 27% decline in reported profit before tax to $15.8bn in the first half of the current financial year, and a 14% drop in Q3 to $7.3bn, due to that Madoff charge. But it’s still raised its net interest income forecast to “$43bn or better”, citing increased confidence in interest rate trajectories in the UK and Hong Kong.
HSBC still appears to have room to grow, with a modest price-to-earnings ratio of 12.8. Although the price-to-book value is higher than it was, at 1.4. The trailing dividend yield has retreated to 4.24%, due to that share price growth. It’s forecast to hit 4.7% this year, nicely covered twice by earnings.
Should I buy now? I have to accept that HSBC can’t maintain its recent breakneck growth. Falling interest rates are likely to squeeze margins, plus there’s always the risk of a wider stock market crash. Despite that, I think the shares are still worth considering. They’ve been at the top of my shopping list for months, waiting for a dip. If it doesn’t come, I’ll buy them anyway. Can’t hang around forever!
