HSBC Holdings PLC (HSBA) is a London, the United Kingdom-based group, which provides banking and financial services worldwide. The company offers a range of banking products and services to cater the needs of customers across Europe, Asia, North Africa, Middle East, Latin America and North America. The company’s operations are divided into four reportable segments being Global Banking & Markets (GB&M), Retail Banking & Wealth Management (RBWM), Commercial Banking (CMB) and Global Private Banking (GPB).

Financial Highlights – H1 Financial Year 2019 (30^th June 2019, $, million)

(Source: Interim Report, Company Website)
 
In the first half of the financial year 2019, due to an increase in RBWM and CMB, the company’s reported revenue rose by 7.6 per cent to $29,372 million from $27,287 million in H1 FY2018. The adjusted revenue climbed by 8 per cent to $28,495 million for the period. Investments increased by 17 per cent to $2.2 billion in H1 2019. The company’s reported PBT (profit before tax) increased by 15.8 per cent to $12.4 billion in H1 FY2019 as compared to $10.7 billion in H1 FY2018. Adjusted PBT surged to $12.5 billion in H1 FY2019 from $11.7 billion in H1 FY2018. Reported PAT (profit after tax) was up by 18.1 per cent to $9.9 billion from $8.4 billion in the H1 of the Financial year 2018. Basic and diluted earnings per share surged by 16.67 per cent to $0.42 as against $0.36 in H1 FY2018. The Net Interest Margin declined to 1.61 per cent in H1 2019 from 1.66 per cent in H1 2018.

Share Price Performance

Daily Chart as at October-24-19, before the market closed (Source: Thomson Reuters)

On 24th October 2019, HSBC Holdings Plc shares were trading at GBX 611.60 at the time of writing before the market close (at 8:43 AM GMT), up by 0.15 per cent against the previous day closing price. Stock's 52 weeks High and Low are GBX 687.70/GBX 578.20.

Conclusion
The company is gearing up for the UK’s exit from the European Union and to provide hassle free services to all the clients based in the Europe and UK. The company will stay active against Future movement of loan costs and international trade tensions, as it may result in downside risks for shareholders.

The geopolitical issues could hinder the company’s main markets and the interest rates are expected to decline in the near future. The ongoing uncertainty in the UK market due to Brexit may impact business operations in the short term and will negatively impact revenue from GB&M and RBWM businesses.

In the second half of the financial year 2019, the company expects its GB&M segment to recover and expects a return on tangible equity (RoTE) to be over 11 per cent in the year 2020. The company is focussed on reducing its cost base using a proactive approach.

In UK, the company is looking forward to transforming itself digitally, growing cards and payments channel and the emergence of Fintech. The company is also 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.

Based on the decent fundamental performance and keeping in mind the potential headwinds, we have given a “Hold” rating at the closing price of GBX 610.70 (as on 23 October 2019).
 

Standard Life Aberdeen Plc

Standard Life Aberdeen PLC (SLA) is a financial services company headquartered in Scotland and has operations in 54 locations globally. The company administer and manage assets across Australia, the Middle East, Asia, the Americas and Europe.
 
Financial Highlights – H1 Financial Year 2019 (30th June 2019, £, million)

(Source: Interim Report, Company Website)
 
In the first half of the financial year 2019, reflecting a positive market movement and investment performance, assets under management and administration increased to GBP 577.5 billion from GBP 551.5 billion in H1 FY2018, while gross inflows remained strong at GBP 36.5 billion in H1 FY2019 and decreased from GBP 37.4 billion reported in H1 2018. Net outflows were at GBP 15.9 billion in H1 FY2019 versus an outflow of GBP 16.9 billion in H1 2018, reflecting lower gross inflow and weak market sentiment. Due to unfavourable market movements in H2 2018, fee-based revenue decreased by 16 per cent from GBP 966 million in H1 2018 to GBP 815 million in H1 FY2019. Led by positive adjustments, IFRS profit before tax from continuing operations rose by GBP 502 million to GBP 629 million, while adjusted profit before tax from continuing operations of GBP 280 million was 10 per cent lower than H1 2018. The adjusted diluted earnings per share were 8.9 pence in H1 FY2019, while reported diluted earnings per share of 27 pence for the period. Interim dividend per share remained unchanged at 7.30 pence for the period.

Share Price Performance

Daily Chart as at October-24-19, before the market closed (Source: Thomson Reuters)

On 24th October 2019, Standard Life Aberdeen Plc shares were trading at GBX 301.30 at the time of writing before the market close (at 10:35 AM GMT), up by 0.57 per cent against the previous day closing price. Stock's 52 weeks High and Low are GBX 311.80/GBX 208.85.

Conclusion
Despite the company reported net outflows, the rate slowed during the period, and total investment performance progressed steadily. With the sale of the European and UK insurance to Phoenix in the year 2018, the risk profile of the company was simplified, but macro factors continue to adversely impact the company’s operations and resulted in an increased risk. Over the last 12 months, the group has returned shareholders a substantial capital and is focused on driving operational efficiency and cost control. Political uncertainties and macroeconomic headwinds may continue to impact the current business environment and investors sentiments. However, the group with its diverse range of resources is well placed to take benefit of the prospects and to deal with the challenges.

Based on the above rationale, we have given a “HOLD" recommendation at the closing price of GBX 299.60 (as on 23 October 2019).

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