Why HSBC Holdings plc Is “Monitoring” Greece Closely

HSBC Holdings plc (LON: HSBA) has a large exposure to the Greek banking system.

| 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 (LSE: HSBA) touts itself as “the world’s local bank”, with a branch network that spans across 73 countries around the world. Unfortunately, Greece is one of the 73 countries in which HSBC is present. In fact, HSBC is more exposed to the Greek banking system than almost all of its European peers. 

Watching events 

HSBC has told investors that it is “monitoring the developments” in Greece closely, as the country teeters on the edge of a sovereign default and banking crisis.  The bank, which generates 34% of group revenues within Europe, is one of the only major European banking groups that has a strong presence within Greece. 

HSBC has a 12-branch retail and commercial network in Greece. So, the group’s local branch network is already feeling the full effects of the crisis, as capital controls limit the amount clients can withdraw from accounts. 

In total, HSBC’s exposure to Greece currently amounts to $6bn and the bank has been reducing its exposure to the troubled Eurozone country over the past few years. HSBC’s exposure has fallen from $7.3bn as reported at the end of 2013. Around $2bn of this $6bn total is tied up in shipping companies based within Greece. 

Small sum 

For a global banking giant like HSBC, being forced to write off $6bn — around 3.7% of the bank’s total net asset value — won’t be the end of the world.  What’s more, it’s unlikely that HSBC will write off the whole debt. As mentioned above, $2bn is tie up in shipping companies based in Greece and these companies are, to a certain extent insulated from the crisis. 

However, a large portion of the bank’s personal and business loans could turn sour as the economic situation within the struggling Eurozone country deteriorates.

Good for business? 

HSBC’s reputation as one of the largest foreign banks operating within Greece has not gone unnoticed. Indeed, there have been some reports that Greek’s are turning to HSBC to offer security, as local banks struggle to remain solvent. 

It seems that the new customers are attracted to HSBC’s global presence and solvency. As a result, HSBC could stand to benefit or, at least, soften the impact of a full default, as new customers look to the bank to offer security. 

Strong balance sheet

At the end of the first quarter, HSBC reported a common equity tier one ratio — its “financial cushion” — of 11.2%, up by 0.1% from the previous quarter. Moreover, the group’s leverage ratio ticked up to 4.9%.

Both of these figures show that the bank is well capitalized. Also, if the group is forced to take a hit from the Greek crisis, the write down should be mopped up in HSBC’s $15bn quarterly operating profit. 

Overall, investors shouldn’t be worried about HSBC’s exposure to Greece, but it’s certainly something to keep an eye on. 

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.

Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has recommended HSBC Holdings. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Fireworks display in the shape of willow at Newcastle, Co. Down , Northern Ireland at Halloween.
Investing Articles

The Anglo American share price soars to £25, but I’m not selling!

On Thursday, the Anglo American share price soared after mega-miner BHP Group made an unsolicited bid for it. But I…

Read more »

Investing Articles

Now 70p, is £1 the next stop for the Vodafone share price?

The Vodafone share price is back to 70p, but it's a long way short of the 97p it hit in…

Read more »

Concept of two young professional men looking at a screen in a technological data centre
Investing Articles

If I’d put £5,000 in Nvidia stock at the start of 2024, here’s what I’d have now

Nvidia stock was a massive winner in 2023 as the AI chipmaker’s profits surged across the year. How has it…

Read more »

Light bulb with growing tree.
Investing Articles

3 top investment trusts that ‘green’ up my Stocks and Shares ISA

I’ll be buying more of these investment trusts for my Stocks and Shares ISA given the sustainable and stable returns…

Read more »

Investing Articles

8.6% or 7.2%? Does the Legal & General or Aviva dividend look better?

The Aviva dividend tempts our writer. But so does the payout from Legal & General. Here he explains why he'd…

Read more »

a couple embrace in front of their new home
Investing Articles

Are Persimmon shares a bargain hiding in plain sight?

Persimmon shares have struggled in 2024, so far. But today's trading update suggests sentiment in the housing market's already improving.

Read more »

Market Movers

Here’s why the Unilever share price is soaring after Q1 earnings

Stephen Wright isn’t surprised to see the Unilever share price rising as the company’s Q1 results show it’s executing on…

Read more »

Investing Articles

Barclays’ share price jumps 5% on Q1 news. Will it soon be too late to buy?

The Barclays share price has been having a great time this year, as a solid Q1 gives it another boost.…

Read more »