HSBC’s share price has outperformed the wider UK banking sector this year. First quarter profits were up, as were revenues. The bank is now taking a quantum leap in its cybersecurity measures to thwart would-be hackers and address one of the biggest risks in banking. HSBC will also leave its Canary Wharf HQ for offices in the City. This is potentially a greater loss for Canary Wharf than for HSBC, considering the bank’s increasing focus on Asia.
- HSBC’s share price up over 18% in 2023, outpacing rival UK banking stocks.
- Quantum physics underpin an advanced cybersecurity system the bank is testing.
- Expansion in Asia continues with the launch of a private banking business in India.
HSBC’s [HSBA.L] share price has outperformed other UK banks this year. Year-to-date, the stock is up over 18%, closing Friday 7 June at 609.9p. The stock’s gangbusters performance has trounced other big UK banking stocks, with Lloyds [LLOY.L], Barclays [BARC.L] and NatWest [NWG.L] recording declines of 5.1%, 6.18% and 12.29%, respectively. And while HSBC’s share price has been trading flat over the past month, it’s shown greater resilience than those rivals; NatWest, for example, has fallen 10.9%.
Boosting HSBC’s share price were strong first quarter results published in May. Pre-tax rose by $8.7bn to $12.9bn. Revenue was up 64% to $20.2bn. Net interest income rose 38%, to $9.0bn, thanks to higher interest rates.
Part of HSBC’s appeal — and its resilience — is its international outlook, with over half of the bank’s business coming from Asia. But will its increased investment in cybersecurity weigh on sentiment? Or is it a case of the bank being ahead of the curve when it comes to the future of the banking industry?
HSBC pilots quantum cybersecurity tech
HSBC has become the first British bank to test a technology that could become the future of cyber security. Quantum key distribution allows two parties to encrypt and decrypt data securely. HSBC will trial the transmission of data between its Canary Wharf HQ and a data centre in Berkshire.
CEO of HSBC Bank Plc and HSBC Europe, Colin Bell, said: “Our customers, clients and employees expect us to have safe and secure operations and resilient cybersecurity, so we must stay ahead of the curve.”
As hackers become more sophisticated, banks need to increase their technological defences to protect customer money. Cybersecurity is the number-one risk to global banks, according to an EY and Institute of International Finance bank risk management survey conducted in January. In the survey, three out of four chief risk officers identified cybersecurity as their top risk this year, ahead of credit risk. The survey took responses from 88 banks across 30 countries.
According to the survey, 58% of respondents cited their organisation’s inability to manage cybersecurity risks as their top strategic threat over the next three years.
HSBC to leave Canary Wharf
HSBC won’t be transmitting data from its current London HQ for too much longer, however. The bank has announced that it is moving out of Canary Wharf in favour of offices in the City. News of HSBC’s departure is a hammer blow for Canary Wharf, which is trying to establish itself as a home and leisure destination after the pandemic left its looming high-rise offices largely empty.
A talismanic London HQ is likely a secondary concern considering the bulk of HSBC’s profits came from Asia. Last week the bank announced a further expansion in the region, with the launch of a global private banking business in India targeting high-net worth individuals. The bank has launched similar services in Thailand and in some cities in China.
This fits with HSBC’s strategy of growing non-interest revenue business, increasing capital allocation to the region Asia-Pacific, and exiting non-core businesses in the West.
This strategy could have more impact on HSBC’s share price than investment in cybersecurity, although addressing one of the current risks in banking is unlikely to be detrimental to the stock.
Analysts tracking the bank have a 757.13p 12-month median price target. Hitting this would see a 24.1% upside in HSBC’s share price. On 7 July, JP Morgan upped its price target on the bank to 680p from 630p and maintained its ‘neutral’ rating on the stock. In May, RBC Capital upped its price target to 800p from 775p.