Join our community of smart investors

HSBC doubles down on Asia

To little surprise, the lender used full-year results to state its Asia pivot is moving “at pace”
HSBC doubles down on Asia
  • Lender doubles down on Asia focus
  • 15 cents a share dividend reinstated

As it seeks to move on from 2020, HSBC (HSBA) is in a unique position among UK-listed lenders in that it has a compelling story to tell. “Economic growth and wealth creation make Asia the largest banking opportunity in the world,” the group trumpeted alongside full-year results, while promising a 10 per cent return on tangible equity in the medium term.

On reflection, 'The Year of the Rat' could have been worse. Expected credit losses of $1.2bn (£852m) in the three months to December, though up from the third quarter, brought full-year impairments to $8.8bn and toward the bottom end of the $8-13bn guidance range given in August. 

Increases in book value and capital also beat consensus forecasts, while the reinstatement of the maximum cash dividend permitted by regulators can hardly hurt relations with the bank's legions of income-focused investors.

However, analyst focus understandably turned to the outlook, buttressed by management’s encouragement in the start to 2021 so far. Investments worth $6bn have been earmarked for further expansion China, Singapore and Hong Kong – unsurprisingly, given the latter has powered most of the group’s profit generation in the last decade.

At the thick of the issues that define modern business – from geopolitics to governance and the uncoupling from fossil fuel finance – HSBC is a fascinating corporate tale. Investors who embrace the China-led growth story will no doubt view it as a textbook example of a value stock, too, given that it still trades at a 20 per cent discount to forecast tangible book value.

Yet a long-term holding requires a long-term idea of the future, which feels too much like guesswork. Hold.

Last IC View: Hold, 335p, 4 Nov 2020

HSBC (HSBA)    
ORD PRICE:428pMARKET VALUE:£87.2bn
TOUCH:428-428.6p12-MONTH HIGH:559pLOW: 282p
DIVIDEND YIELD:2.5%PE RATIO:32
NET ASSET VALUE:964¢LEVERAGE:16.1
Year to 31 DecTotal operating income ($bn)Pre-tax profit ($bn)Earnings per share (¢)Dividend per share (¢)
201659.87.17.051
201763.817.248.051
201863.619.963.051
201971.013.330.030
202063.18.819.015
% change-11-34-37-50
Ex-div:11 Mar   
Payment:19 Apr   
£ = $1.41