MENU

Better-Than-Expected Results Boost HSBC Holdings plc

HSBCShares in HSBC (LSE: HSBA) (NYSE: HSBC.US) climbed 2% in early trade this morning, following half-time results that weren’t quite as bad as some City analysts had expected.

Pre-tax profit fell by 12% to US$12.34bn compared with $14.07bn in the comparative period last year, after a 4% decrease in first-half revenue to $31.36bn. Earnings per share slipped slightly to $0.50 from $0.54, while dividends per ordinary share remained unchanged at $0.20.

HSBC also declared that it is setting aside around $234m for “customer redress programmes”, which is perhaps a more flowery term for the likes of Lloyds‘ “legacy issues”, but mis-selling PPI charges and LIBOR rigging rates all file under the same category, however you name it. The good news for shareholders, though, is that this amount is significantly less than the $412m set aside in H1 2013.

Like most of the UK’s high-street banks, HSBC continues to streamline its operations to make it more efficient and less complex, further strengthening the company’s capital position. As the bank does the majority of its work across Asia, though, investors ought to pay close attention to HSBC’s forecasts for the region as well, and the market was cheered by news that management “have slightly increased our forecasts for mainland China GDP growth in 2014 to 7.5% and expect Hong Kong to benefit from export growth in the second half of the year”.

Group chief executive Stuart Gulliver commented:

“We remain broadly positive about the economic outlook for the majority of our home and priority markets… Whilst regulatory uncertainty persists, our balance sheet remains strong. Our ability to generate capital continues to support our progressive dividend policy. We remain well placed to meet expected future capital requirements, to continue to deliver an attractive total shareholder return and to establish HSBC as the world’s leading international bank.”

 While Lloyds is yet to resume dividend payments following the Financial Crisis, and Barclays the beaten-down bank in the sector right now, HSBC currently offers a yield of over 4.5% to rise above its fellow high-street banks on this valuation.

There are many different ways to value a bank, of course. You should download the Motley Fool's free guide to bank shares to discover six key ratios that provide a good starting point for evaluating the sector's largest names.

Our banking expert penned this special report to teach other Fools how to understand these often confusing companies. Download the report today and you'll see for yourself why HSBC may be a bargain!

Sam Robson has no position in any shares mentioned. The Motley Fool has no position in any of the shares mentioned.