On Tuesday (30 April), the HSBC (LSE:HSBA) share price rose on the back of a positive earnings report. However, there’s a few other things going on. Let’s take a closer look at the full picture.
HSBC’s earnings beat
HSBC beat the market’s expectations for the first quarter of the year. An ‘earnings beat’ often results in the share price pushing upwards unless there is some unwelcome guidance — for the next quarter(s) — or changes to dividends or buyback policy.
The largest listed bank in the UK posted a 1.8% drop in first-quarter profit to $12.7bn (£10bn), but some softening was expected versus the first quarter of 2023. However, the results were still better than anticipated. Revenue came in at $20.8bn, marking a strong performance versus the median forecast for about $16.9bn.
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Moreover, HSBC announced a $3bn share buyback, and approved a first interim dividend of 10¢ per share, in addition to a special dividend of 21¢ per share. The special dividend came after the increasingly Asia-focused bank completed the sales of its Canadian banking unit for $9.96bn.
HSBC’s CEO resigns
The earnings report coincided with a surprise announcement that HSBC group chief executive Noel Quinn would be leaving after five years in the job. His resignation comes amid deteriorating relations between the West, notably the US and China, and follows a strategic shift undertaken by Quinn to invest more in the company’s Asia business.
Worsening relations between China and the US threaten to undo much of Quinn’s hard work. In a conference call note, and perhaps reminiscent of Liverpool FC manager Jurgen Klopp’s comments a couple of months back, Quinn said that “doing this job, you have to give 100 percent if not 120 percent of your energy, your mindset your time to the role.”
Normally, this would have a negative impact on the share price. However, Quinn said he’d stay in the role until a suitable replacement was found. His announcement doesn’t appear to be holding the stock back.
China hints a property market support
HSBC’s exposure to China’s property market represents less than 2% of its total loans, however it has held the stock back over the past 18 months. Last year, I even read some American articles that suggested HSBC was uninvestable because of this China exposure.
On 30 April, China’s politburo said it would explore measure to sell the country’s unsold homes and look to lower overall borrowing costs. Details were unclear, but some further support for the sector may relieve some of the bearish sentiment we’ve seen over the past 18 months.
My take on HSBC
HSBC stock’s actually been very volatile over the past 12 months, especially considering it’s one of the UK’s largest companies by market-cap. It offers a 7.7% dividend yield — which is huge — and is currently trading at 7.3 times earnings. It also appears to be trading around 6.7 times forecasted earnings for 2024.
Personally, while I think HSBC is an attractive option, I’ve elected for Barclays, Lloyds, and Intesa Sanpaolo. I just think they offer better value.
