The HSBC share price [HSBA.L] has been in the money over the last 12 months as its investors cheer its tilt to the booming economies of Asia.
The HSBC share price has surged 60.7% from 276.50p at the close on 25 September to 444.48p at the close on 8 March.
The HSBC share price fell back to 415.50p on 22 April, but a strong first-quarter performance helped it bounce back to 455.30p on 28 May.
In its first-quarter results, the bank’s profits rose 79% to $5.8bn year-over-year. However, its revenues, still battered by record low interest rates around the globe, dropped 5% to $13bn.
HSBC's Q1 profits - a 79% YoY rise
Lending a hand
The HSBC share price took succour from its lending figures which, despite the pandemic, climbed by $2bn, driven by demand for mortgages in the UK and Hong Kong. It forecast mid-single-digit percentage growth in customer lending in 2021.
The HSBC share price has also been lifted by its continued shift to Asia as part of a transformation plan. This includes recently selling off its US and French retail banking operations. It has also shifted capital into higher-return areas such as wealth management.
Another boost for the HSBC share price came at the end of June when it was named as the only European bank in the top 10 of The Banker’s latest top 1,000 world banks ranking. HSBC moved up one place to eighth on the list as its Tier 1 capital, a key measure of banking strength, rose by 8% to £115bn.
HSBC's rise of lending figures
However, The Banker noted that all five major UK banks (the others are Lloyds [LLOY.L], Natwest [NWG.L], Barclays [BARC.L] and Standard Chartered [STAN.L]) saw a decline in pre-tax profits year-over-year, with HSBC falling by 34.2%.
These remain challenging times for the bank, and the HSBC share price remains far short of the pre-pandemic 794.50p level it reached on 17 January 2018 and the 674.80p level on 5 July 2019.
Even though its tilt towards Asia is winning positive feedback, there are concerns that it means getting entangled in social and political controversy in China.
It was this exposure that sent the HSBC share price on another downward path to sit at 423.10p at the close on 6 July.
Online banking issues
The trigger was a Twitter post that shared a link to the HSBC website showing that customers may not be able to use online or mobile banking outside of Hong Kong from 26 July.
HSBC quickly apologised to customers, stating that there was no plan for any amendment of services. But concerns remain about what this means for the HSBC share price going forward.
According to MarketScreener, a consensus of 24 analysts rate HSBC a hold. And, according to Financial Times Markets Data, analysts’ 12-month percentage price change estimates for the HSBC share price range from a 38.1% increase for a high estimate of 584.24p to a 2.4% decline for a low estimate of 413.09p, as compared to its 6 July closing price.
“This is one of the most undervalued FTSE 100 financial companies. It’s trading at a significant discount to book value per share, despite its growth potential,” Rupert Hargreaves, wrote in The Motley Fool, is certainly a fan.
“Its asset disposals should help reduce costs and improve profit margins. At the same time, the bank is investing more in its Asian operations. These have historically been a profit centre for the enterprise. I’m encouraged by the shift to Asia” - Rupert Hargreaves
“Its asset disposals should help reduce costs and improve profit margins. At the same time, the bank is investing more in its Asian operations. These have historically been a profit centre for the enterprise. I’m encouraged by the shift to Asia,” he added.
However, he is concerned that if interest rates remain depressed for years to come that the bank “may never return to pre-crisis levels of profitability”.
Royston Roche, also writing in The Motley Fool, is cautious about the future direction of the HSBC share price as well.
“The bank is investing over $6bn [in Asia] in the next five years. The move doesn’t surprise me since the Asian region is growing at a faster rate than the UK,” he wrote.
“The bank is investing over $6bn [in Asia] in the next five years. The move doesn’t surprise me since the Asian region is growing at a faster rate than the UK” - Royston Roche
“The bank’s strategy to shift to Asia is not without any risks. It had also tried this strategy on earlier occasions, but it did not have much success. The bank will also have to forego some of its existing European retail business. The political differences between China and Western countries might also negatively impact HSBC shares.”
Investors can track the direction of the HSBC share price in banking and other thematic ETFs. The bank is a key holding in the Amundi ETF MSCI Europe Banks UCITS ETF with a 15.07% weighting as of 30 June.