HSBC Holdings plc: The FTSE 100’s Best Bank?


Although shares in HSBC (LSE: HSBA) have firmed up over the course of the last few weeks, they have still disappointed during the course of 2014. Indeed, while the FTSE 100 has fallen by 2% since the turn of the year, HSBC is currently down 5% at the time of writing.

Does weak sentiment mean that other UK banks could be more attractive right now, or is HSBC still the FTSE 100’s best bank?

Growth Potential

While many of its banking peers have endured a number of loss-making years during the credit crunch, HSBC has remained profitable throughout the worst banking crisis in living memory. Indeed, profits have risen in three of the last five years and this shows that the bank is arguably more stable than many of its peers.

Furthermore, HSBC is expected to deliver earnings per share (EPS) growth that is above the index average, with its bottom line expected to rise by 7% this year and by 9% next year. Although many of its peers are due to report faster growth over the same time period, HSBC is starting from a much higher base (as it didn’t make a loss in the last five years) and so remains a bank with a highly attractive, as well as more stable, growth profile.

A Top-Notch Yield

As well as having strong growth potential, HSBC remains one of the top yielding shares in the FTSE 100. It currently yields a highly impressive 4.9% and, in addition, dividends per share are expected to grow at a brisk rate. For instance, HSBC is due to yield as much as 5.3% in 2015 as dividends are set to rise by just over 8%. This is well ahead of inflation and highlights the huge attraction of HSBC as an income stock.

Looking Ahead

Clearly, the UK banking sector continues to experience lumps and bumps, with there likely to be more in the road ahead. Furthermore, HSBC’s exposure to China, while positive in the longer term, could make it more susceptible to higher volatility than many of its domestically focused peers. This means that HSBC’s share price could continue to fluctuate heavily and also suffer from prolonged periods of weak sentiment.

However, for longer term investors, it remains the bank with the most attractive yield, best earnings profile and, with shares trading on a price to book ratio of just 1.1, among the best valued, too. As such, it still appears to offer the best overall investment opportunity of all the UK listed banks.

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Peter Stephens owns shares of HSBC Holdings. The Motley Fool has no position in any of the shares mentioned.