Trading at over 600p two years ago, the HSBC (LSE: HSBA) share price is currently around 410p. Already falling pre-pandemic, 2020 saw a 35% plunge for the stock. Yet after posting solid half-year results, and up 8% year-to-date, will we continue to see a rise? Let’s take a look.
Bull case
After struggling through the pandemic, the latest set of results released by HSBC provided some form of optimism. For half-year 2021, compared to the same period in 2020, pre-tax profit increased by $6.5bn to $10.8bn. The bank was also keen to highlight how all regions were profitable in the period. Pre-tax profit for Q2 was also up by $4bn. This shows a strong comeback from the pandemic and this momentum should carry through the rest of the year. I think now is a great time to buy before we potentially see a rise in the HSBC share price.
To add to this, HSBC also announced the reinstatement of dividends (7 cents a share) for shareholders. This is part of a larger initiative as it targets a dividend payout ratio of 40%-55% for 2021.
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The bank has also been eager to strengthen its business in Asia. Not only has it made $6bn worth of investments in Hong Kong, China, and Singapore, it has also made new appointments in the region. As the Asian economy continues to grow, I see this as a smart move. This should hopefully have a positive impact on the share price.
Bear case
With that all said, I do see a few issues with HSBC. Firstly, although its latest results were solid, some figures did worry me. Most notably, revenues were down both in the half-year and Q2 compared to 2020. Should this continue, this could cause issues in the future.
On top of this, although a focus on Asia has the potential to see the bank thrive in the future, it also comes with problems – mainly geopolitical. As my colleague Manika Premsingh highlighted, the firm has faced multiple challenges recently. From Brexit in the UK to US-China tensions, HSBC has been caught in these clashes. Where in previous times it has remained neutral amid political disputes, it recently appeared to be backing Beijing over Hong Kong. With a large percentage of pre-tax profits made in Asia, engaging in political disagreements could have a detrimental impact on the bank. Any backlash from doing so would inevitably hurt the share price.
Will the HSBC share price rise?
I think the latest set of results shows that HSBC is moving in the right direction. As we see the global economy begin to recover, the bank should profit hugely from this. I am a fan of its focus being shifted to Asia as I think this will provide plenty of opportunities in the future. However, I am aware of the potential problems that come with this shift. Geopolitical issues could have a major impact on HSBC, not necessarily for the right reasons. With that said, I think the bank is still in a strong position to thrive, and as such, I would buy.
