The HSBC (LSE: HSBA) share price is a thing of wonder. It’s up 45% in the last 12 months, and 200% over five years. Normally, when I see past performance like that, I get a little nervous. My worry is that I hop on the bandwagon just as the wheels come off. Is that a risk today?
While HSBC shares look pretty wonderful, that seems to come as standard for FTSE 100 banks these days. They’ve all done well lately.
One reason is that they’ve finally tidied themselves up after the financial crisis. Another is that they’ve been boosted by several years of higher interest rates. These allowed them to widen net interest margins, the difference between what they pay savers and charge borrowers.
HSBC has been making a lot of money as a result. It has a massive opportunity in Asia, notably in China, Hong Kong and Singapore. Plus it recently opened its first Middle East wealth centre in the UAE. This gives it a more diversified earnings base than a purely UK-focused bank.
Flying FTSE 100 sector
In 2024, it posted bumper pre-tax profits of $32.3bn, up 6.6% from $30.3bn the year before. Profits dipped in 2025 to $29.9bn, but that was largely due to one-offs impairments, legal provisions and restructuring costs. Even so, it’s still a huge number, and the board handsomely rewarded shareholders, hiking the full-year dividend by 13.6%. In the five years since the pandemic, HSBC has increased shareholder payouts at an average compound rate of around 38% a year. Few FTSE 100 companies can match that.
HSBC has also been incredibly generous with share buybacks, which totalled $6bn last year. These have now been put on hold for nine months as it spends £13.6bn completing its stake in Hang Seng Bank. Investors will be hoping they resume after that.
Management has been simplifying the group, exiting weaker markets and focusing on core strengths such as wealth management. It’s now targeting an improved tangible return on equity of 17%, combined with a dividend payout ratio of around 50% of earnings. Today, the trailing yield is 4.4%. That’s forecast to hit 4.48% this year and 5.28% in 2027.
The shares don’t look especially expensive despite their strong run, with a forward price-to-earnings ratio of 10.9. But as always, there are risks.
Share buyback on pause
China isn’t the high-speed growth machine it was, and worries continue to dog its property and shadow banking sector. Big global banks may also have exposure to two potential bubbles, in artificial intelligence and the private credit market. If they burst, HSBC’s loan impairments could increase. The bank’s international footprint is attractive, but it’s also exposed to geopolitical tensions, including today’s Middle East disruption.
The HSBC share price has held pretty steady in recent weeks. There could be more war-related market volatility to come, but any dip could make HSBC look even more tempting, for investors who take a long-term view. This looks like a strong and profitable business trading at a decent price, and well worth considering today.
