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Here’s my take on the HSBC share price, and it’s not what you’d expect

It’s a tough time to be a bank right now. Banking stocks within the FTSE 100 have taking a pounding this year. This is especially true of the HSBC (LSE: HSBA) share price, down some 36% from the beginning of the year. With a fair few investors expecting the stock to fall even further in coming months, I thought it time to consolidate my take on HSBC.

HSBC share price: a quick review

For readers unfamiliar with what’s happened to the share price of late, it has fallen steadily since last summer. One main catalyst for this was the protests in Hong Kong. The disruption they caused to the economy was large and negative, and with Hong Kong being the largest market for the bank, this had an obvious impact.

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As we headed into the end of last year, Q3 results showed net profit down 24%. Rumors then surfaced of a huge planned restructure of the bank. Part of this would include job cuts, which was later confirmed as being over 35,000 redundancies. The bank said that this was to enable it to focus on the profitable areas of the business.

The HSBC share price has therefore continued to tumble. Even income investors (who had been buying the stock due to an 8%+ dividend yield earlier this year) have turned less positive after the bank cut the dividend payout in April. The end result sees the share price trade around 385p, from a level of 670p last July.

My take on the future

I think the HSBC share price is actually oversold at the moment, and I feel that way for several reasons. Firstly, the global restructure will be a longer-term positive. This can be seen with other large firm restructures over the past few decades. Cutting costs, along with unprofitable areas of the business, and focusing on the future is not a bad thing. I understand the short-term hit with job losses and uncertainty is terrible to go through, but it will serve the overall business well in the long term.

The hit to revenues from the primary market in Asia (mostly Hong Kong) could also be a short-term one. The unrest within the area has somewhat calmed from last year. This leads me to conclude that the market in Hong Kong can remain a sweet spot for the bank to generate profits going forward. However, tensions remain, so there’s some uncertainty here and HSBC will have to be skilled at navigating the difficult ethical issues that it could face.

Finally, I don’t see the dividend cut being a unique factor encouraging holders to sell HSBC shares alone. Many FTSE 100 firms planned dividend cuts over the past few months. This is nothing unique to the bank, and indeed, it simply followed guidance from the Bank of England. So again, for the longer term, a resumption of dividend payments when the time is right should aid the share price.

Yes, the HSBC share price is under pressure and many are selling their HSBC stock. But I’d do the opposite. I’d hold on to existing shares, and even look to buy into the bank if I wasn’t already invested.

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Jonathan Smith does not own shares in any firm mentioned. The Motley Fool UK has recommended HSBC Holdings. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.