ii view: HSBC offers confident outlook

Its share price is still lower than the market's March 2020 bottom compared to gains for rivals, but October was HSBC's best month in ages. We assess prospects.

Third-quarter results to 30 September

• Currency adjusted revenue down 1% to $12.2 billion (£8.9 billion)
• Profit before tax up 74% to $5.4 billion (£3.94 billion)
• Capital cushion or CET1 ratio of 15.9%, up from 15.6% in Q2 
• Commencing a $2 billion share buyback programme (£1.46 billion)

Chief executive Noel Quinn said:

"We had a good third-quarter performance, with strong growth in profits supported by additional credit provision releases. Our strategy remains on track, with good delivery in all areas. This was reflected in more consistent top-line growth, robust lending pipelines across our businesses, and rising trade and mortgage balances."

ii round-up:

Founded in 1865 in Hong Kong and now headquartered in London, HSBC (LSE:HSBA) serves more than 40 million customers in over 60 countries worldwide. 

It operates across the three arenas of Wealth and Personal Banking, Commercial Banking, and Global Banking and Markets.  

For a round-up of these latest quarterly results, please click here.

ii view:

HSBC employs over 200,000 people. Like fellow banks such as Lloyds (LSE:LLOY) and JPMorgan (NYSE:JPM), HSBC was able to report a writing back of previously made pandemic-related bad debt provisions. Its current strategic goals include focusing and investing in the areas where it sees significant opportunities for growth; investing in technology to better serve customers and increase efficiency; simplifying working practices and training staff; and helping its customers and communities to benefit from a low-carbon economies. 

For investors, geopolitics and challenging relations between China and the US offer caution. Asia accounts for around 60% of HSBC's overall profit, a region which China has significant influence over. Plans to become a leading wealth manager in Asia will encounter fierce competition. 

But potential for interest rate rises should aid its net interest margin - the difference between deposit and lending rates - improving its revenue outlook. A discounted valuation, strong cost control, a transition programme refocusing its businesses towards areas of strength, and an estimated future dividend yield of over 4% all add to the positives. In all, with cash for a new share buyback programme arguably underlining management outlook confidence, HSBC looks to remain worthy of long-term investor support.   

Positives: 

• Transformation plan being pursued
• New $2 billion share buyback programme 

Negatives:

• Adjusted revenue down 1%
• Persisting political tensions between the West and China

The average rating of stock market analysts:

Buy