Is this ‘high-quality’ bank worth 20% more?
A Buy note on this FTSE 100 banking heavyweight reckons the City has failed to grasp the upside potential of its dominant market positions in Asia.
10th December 2025 15:17
by Graeme Evans from interactive investor
An upgrade on HSBC Holdings (LSE:HSBA) shares has backed the lender to advance by another 20% as it capitalises on significant opportunities in Hong Kong deposits and the Asia wealth market.
Bank of America said HSBC’s valuation of 8.5 times forecast 2026 earnings was cheap for a high-quality franchise, given that other banks with a similar profile are on a multiple of ten times.
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The bank lifted its price target to 1,300p from 1,160p, having upgraded its earnings per share forecasts due to higher revenues growth and expectations for an acceleration of share buybacks to a quarterly run rate of $2-3 billion (£1.5-2.6 billion) from the second quarter.
The upbeat assessment helped HSBC shares to outperform the wider banking sector in today’s FTSE 100 session, with shares up 23.4p to 1,091.4p for a rise of about 40% so far this year.
Bank of America’s analysis focused on HSBC’s plans to step up investment in Hong Kong deposits and Asia wealth management, where its competitive advantage is already strong.
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The strategy follows an organisational simplification that has seen HSBC exit 11 markets so far this year, including retail banking in Bahrain and Bangladesh and UK life insurance.
Bank of America said: “We expect the increased resource allocation to amplify its competitive advantage, and result in market share gains.”
HSBC has an approximate 40% market share in Hong Kong, with a particularly strong deposit franchise partly the result of flows out of China.
Wealth inflows have benefited from the large interest rate differential between China and Hong Kong, where the currency is tied to the US greenback.
There’s also been large demand for investment diversification, especially with the significant outperformance of offshore assets versus China onshore assets.
The report added that Hong Kong stock exchange turnover is expected to stay high in 2026, which should drive high-teens wealth fee income growth per year.
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Bank of America said the City is only factoring in about 3% deposit growth and low teens in wealth fee income, which it thinks underestimates the magnitude of the growth potential.
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