10 Reasons Why Q3 Results From HSBC Holdings Plc Confirm My Buy Case

Roland Head highlights ten points from HSBC Holdings plc (LON:HSBA) which confirm his buy case for the stock.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

HSBC Holdings (LSE: HSBA) (NYSE: HBC.US) shares have fallen by more than 10% from their May peak, leaving the UK’s biggest bank up by just 6% this year, compared to the FTSE 100‘s 13% gain.

For me, however, this is good news, as I believe HSBC remains a strong buy, and intend to increase my holding — a decision that was confirmed by last week’s third-quarter results.

Costs down…

Bad debt charges fell by 27% from £6.5bn in Q3 2012 to just £4.7bn. HSBC also reduced its cost-efficiency ratio — which measures a bank’s costs as a percentage of its revenue — from 61.2% during the first nine months of last year, to just 56.6% during the same period this year.

HSBC says that it has achieved $4.5bn of sustainable savings across its business so far this year, exceeding its full-year target. The bank’s operating expenses fell by 4% during the third quarter, compared to the same period in 2012.

…Profits up

HSBC’s reported pre-tax profits for the third quarter were $4.5bn, a 30% increase on the same period last year. Revenue was broadly unchanged on the third quarter of 2012, but the bank’s return on equity, a key measure of profitability, rose from 8.9% to 10.4% on an annualised basis, during the first nine months of this year.

HSBC also logged a $1.1bn profit on the sale of its operations in Panama during the third quarter, delivering a profitable exit from a troublesome market.

13% dividend growth

HSBC’s dividend policy is for three equal quarterly payments, followed by a variable fourth-quarter payout.

This year’s quarterly dividend has been $0.10, which represents an 11% increase on last year’s $0.09 payout. If analysts’ consensus forecasts are correct, and the bank’s fourth-quarter payout is $0.21, then shareholders like me will have enjoyed an inflation-busting 13% dividend hike in 2013.

Rock-solid balance sheet

HSBC’s core tier 1 capital ratio — the standard measure of banks’ ability to withstand financial shocks — rose to 13.3% during the third quarter, from 12.7% at the end of June. In comparison, Barclays’ core tier 1 ratio is just 11.3%, Royal Bank of Scotland clocks in at 11.6%, and Standard Chartered‘s is 11.4%.

HSBC’s cash balance also continued to rise during the last quarter, reaching an impressive $170bn — up from $148bn at the end of June, and from a mere $63.5bn at the end of 2010. 

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.

> Roland owns shares in HSBC Holdings but not in any of the other companies mentioned in this article. The Motley Fool owns shares in Standard Chartered.

More on Investing Articles

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »

Investing Articles

Are HSBC shares a FTSE bargain? Here’s what the charts say!

There are plenty of dirt-cheap FTSE 100 banking stocks for investors to choose from today. Our writer Royston Wild believes…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Just released: Share Advisor’s latest ‘Hold’ recommendation [PREMIUM PICKS]

In our Share Advisor newsletter service, we provide buy, sell, and hold guidance for our universe of recommendations.

Read more »