International banking giant HSBC (HSBA) reports its 2013 figures on Monday and, as the global economic recovery continues to gather pace, investors can expect a solid performance.
Credit quality, for instance, should look substantially better than it did a year ago as rapidly improving conditions in the US have helped the bad debt charge at HSBC’s consumer finance unit there (now in run down) to collapse. Indeed, the group’s bad debt charge fell 28 per cent in the year to end-September. Moreover, without RBS-style (RBS) legacy issues to afflict performance, earnings growth should be good, too. Broker Investec Securities forecasts EPS for 2013 to have risen 20 per cent year-on-year to 89¢ (53.3p). Costs also look under control and the bank’s cost-to-income ratio slipped over four percentage points in the year to end-September, to 56.6 per cent. Such factors are allowing HSBC to generate plenty of capital and a Basel III core tier one capital ratio of 10.6 per cent (at the third-quarter stage), leaves its amongst the world's best capitalised banks. That ability to generate capital also points to impressive income characteristics and, based on Investec’s forecast payout for 2013, the shares yield around 5 per cent.
