HSBC Holdings Plc

HSBC Holdings Plc (LON: HSBA) is a London, the United Kingdom-based company providing banking and financial services worldwide. The company offers a range of banking products and services to cater to the needs of customers across Europe, Asia, North Africa, Middle East, Latin America and North America.

Recent News
On 9th December 2019, HSBC Holdings stated that Pam Kaur will hold the responsibilities of Chief Risk Officer effective from 1st January 2020.

Samir Assaf will be stepping down from his position of GB&M’s (Global Banking and Markets) CEO effective from 1st March 2020 and will be replaced by Greg Guyett (Head of Global Banking) and Georges Elhedery (Head of Global Markets).
The company’s Chief Operating Officer, Andy Maguire will be retiring from his position effective from 30th January 2020 and will be leaving the company on 9th June 2020. Mr Andy will be replaced by John Hinshaw.

Financial Highlights – Q3 Financial Year 2019 (30^th September 2019, $, million)

 (Source: Quarterly Report, Company Website)
 
In the first nine months of the financial year 2019, the company’s reported revenue rose to $42,727 million from $41,085 million in 9M FY2018, due to an increase in RBWM and CMB. The adjusted revenue climbed to $41,762 million for the period.  Adjusted PBT (Profit before tax) surged to $17,864 million for 9M FY2019 from $17,814 million for 9M FY2018. The company’s reported PBT stood at $17,244 million for 9M FY2019 versus $16,634 million for 9M FY2018. The Net Interest Margin declined to 1.59 per cent for 9M FY2019 from 1.67 per cent for 9M FY2018. The basic earnings per share for 9M FY2019 stood at 0.57 cents versus 0.56 cents for 9M FY2018.

Share Price Performance

Daily Chart as of  December 11^th, 2019, before the market close (Source: Thomson Reuters)

HSBC Holdings Plc shares were trading at GBX 566.10 at the time of writing before the market close (at 8:44 AM GMT) on 11^th December 2019 and was up by 1.29% versus the previous day closing price. Stock's 52 weeks High is GBX 687.70 and Low is GBX 552.30.

Valuation Methodology


Conclusion
In 2020, the company no longer be expected to reach the RoTE target of over 11 per cent. The company expect to sustain the dividend and maintain a CET1 ratio of more than 14 per cent. In the third quarter of 2019, some parts of the business, especially Asia, held up well in a challenging environment. However, in some parts of regions, the company’s performance was decent. The company is looking forward to expanding its operations in the Chinese region, which will offer new opportunities to grow and help the company to offset the impact created by the economic and political uncertainties globally. Therefore, the company is focussing on investing capital in regions which offers high growth potential opportunities.

HSBC Holdings PLC witnessed a CAGR growth of ~1.68% in interest income (Bank) over the period of FY15-FY18 while net income recorded a CAGR growth of ~0.5% during the same period.

Based on the decent prospects and supported by valuation done using the above method, we have given a “BUY” recommendation at the closing price of GBX 558.90 (as on 10^th December 2019) with a single digit-upside potential based on 0.95x NTM Price/Book Value (approx.) on FY19E book value per share (approx.).
 
*The “Buy” recommendation is valid for the current price as covered in the report (as on 11^th December 2019).
*All forecasted figures have been taken from Thomson Reuters.Currency exchange rate taken for 1 USD = 0.7620 GBP.

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