At 880.50 pence, HSBC (LSE: HSBA) sits comfortably in the middle of the FTSE 100 pack, neither flying high nor falling apart.
With a 5.69% dividend yield, it certainly offers income in a world still hunting for it. But whether the shares are a genuine bargain or just fairly priced for a mature, globally exposed bank is a more complicated question.
Let’s start with the numbers. First-quarter results showed pre-tax profit of $9.5 billion, down 25% from the prior year. That sounds a little dramatic, but the prior period was flattered by one-off gains. Stripping that out, underlying performance was solid. Return on tangible equity came in at 18.4%, a figure most UK banks can only envy.
HSBC is in the middle of a significant reshaping. It’s winding down investment banking activity in the US and parts of Europe, slashing headcount, and aiming for $1.5 billion in cost savings by the end of 2026. Management appears serious about streamlining the business and concentrating firepower where it believes the returns will be highest – namely Asia and the Middle East.
HSBC is becoming more geographically concentrated at a time when political risk is rising, particularly in China. The bank is leaning hard into its historical strengths, wealth management, commercial lending, and global trade finance in the East, while retreating from advisory and capital markets in the West. That might preserve margins and improve efficiency, but it also narrows optionality if the global economic centre of gravity shifts again.
Then there’s the interest rate problem. HSBC benefited handsomely from rising rates over the last two years, particularly in Hong Kong and the UK. That benefit is starting to fade. The net interest margin slipped slightly last quarter, and management has openly acknowledged that falling rates could knock billions off revenue over the next few years.
Still, the share price doesn’t reflect much optimism, or risk. The current valuation implies low expectations, yet the bank is returning capital through dividends and buybacks at pace. The latest $3 billion buyback follows a solid $2 billion earlier this year, suggesting confidence in the balance sheet and long-term cash generation.
So, are the shares a bargain? That depends on what you expect from them. If you’re looking for income, HSBC delivers. If you believe in Asia’s economic resilience and think rates will stay higher for longer, there’s an argument for valuation adjustment. But if you’re sceptical of concentrated regional bets or worry about macro reversals, the upside may be capped.
What’s clear is that HSBC isn’t standing still. Whether it’s moving in the right direction, that’s still up for debate.