Will HSBC holdings plc ever recover to 700p?

Will HSBC Holdings plc (LON: HSBA) ever return to a heady 700p price?

| 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.

Shares in HSBC (LSE: HSBA) have struggled to gain traction since the financial crisis. After hitting a low of around 370p back in 2009, the bank shares quickly recovered to 740p by the end of the year before steadily grinding lower over the next few years to a low of 470p in 2011 when the European debt crisis hit the headlines. 

After recovering from the European debt crisis, shares in HSBC went on to rally to a multi-year high of 760p, the highest level since 2008. However, since touching this high in 2013 HSBC’s shares have pushed lower every year, and now trade at a level not seen since the financial crisis.

HSBC is quite clearly in better shape than it was back in 2008, as is the wider global financial system. So why are the bank’s shares trading at a level that would suggest complete economic anarchy? Is there a chance they’ll ever recover to the levels seen back in 2013?

Should you invest £1,000 in Abrdn right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Abrdn made the list?

See the 6 stocks

Huge changes 

There’s no doubt that HSBC has changed significantly over the past decade. The bank has withdrawn from numerous non-core markets, has cut tens of thousands of jobs and has recently embarked on a drive to cut more than $200bn of risk-weighted assets from its balance sheet. 

These initiatives have made the bank smaller, which could explain some of the declines, although while HSBC has been shrinking itself, profits have remained relatively consistent. 

For example, back in 2011 HSBC reported a pre-tax profit of around £15bn, for full-year 2015 the bank reported a pre-tax profit of £13bn, a decline of around 13% compared to a 26% fall in bank share price over the same period. City analysts currently expect HSBC to report a pre-tax profit of around £12bn for full-year 2016, which could explain a bit of the decline. Investors could be selling off the bank in anticipation of further revenue and profitability declines.

Still, over the past five years, HSBC has become a FTSE 100 dividend stalwart. The bank kept its dividend payout steady for the previous five years and over the period shares in HSBC have supported average dividend yield of around 5% — one of the most attractive yields in the UK’s leading stock index.

However, over the same period, a worrying trend has developed. HSBC’s dividend cover, the number of times a company’s dividend payout is covered by earnings per share, has declined from around 2.2 times to 1.3 times today. 

If the bank increases its dividend payout next year at the same rate it has done in the past, City analysts expect the payout cover will fall to 1.2 times—that’s dangerously close to the level many analysts would consider unsustainable.

The bottom line

So overall, while HSBC’s dividend yield of 8% may seem attractive, unless the bank’s profits suddenly reversed course and start expanding again, it’s unlikely shares in HSBC will return to 700p any time soon.

Should you buy Abrdn now?

Don’t make any big decisions yet.

Because Mark Rogers — The Motley Fool UK’s Director of Investing — has revealed 5 Shares for the Future of Energy.

And he believes they could bring spectacular returns over the next decade.

Since the war in Ukraine, nations everywhere are scrambling for energy independence, he says. Meanwhile, they’re hellbent on achieving net zero emissions. No guarantees, but history shows...

When such enormous changes hit a big industry, informed investors can potentially get rich.

So, with his new report, Mark’s aiming to put more investors in this enviable position.

Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!

Grab your FREE Energy recommendation now

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.

We think earning passive income has never been easier

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

More on Investing Articles

Investing Articles

At a 52-week low but forecast to rise 73%! Is this growth share the FTSE’s top recovery play? 

This FTSE 100 growth share has taken an absolute beating over the past two years but Harvey Jones says the…

Read more »

Investing Articles

This FTSE 250 share offers a juicy 9.8% yield. Will it last?

This well-known FTSE 250 share has a percentage dividend yield approaching double digits. Should Christopher Ruane add the income share…

Read more »

Investing Articles

Is a £333,000 portfolio enough to retire and live off passive income?

A third of a million pounds can generate a serious amount of passive income, but relying on this sum alone…

Read more »

The flag of the United States of America flying in front of the Capitol building
Investing For Beginners

Why FTSE 100 investors should pay attention to ‘Liberation Day’

Jon Smith explains why the upcoming tariff announcement from across the pond could have an impact on the FTSE 100,…

Read more »

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

Here’s why Nvidia stock fell 13% in March

The Nvidia stock price rise was looking unstoppable. Should investors now be wondering if the same might be true of…

Read more »

US Stock

It’s ISA deadline week! Here’s my 3-step game plan

Jon Smith tries to calm the hype around the last minute ISA rush to buy stocks and explains why he's…

Read more »

Snowing on Jubilee Gardens in London at dusk
Investing Articles

£10,000 invested in BAE Systems shares at Christmas is now worth…

BAE Systems shares have been surging in the FTSE 100 in 2025, driven higher by the wavering US commitment to…

Read more »

Investing Articles

Up 19% in 2 weeks, can the Tesla share price rebound further?

Tesla's first-quarter delivery numbers came out today. Will they help persuade our writer to invest his money at the current…

Read more »