HSBC Holdings (LSE: HSBA) (NYSE: HSBC.US) is set to deliver first-half results on Monday 4 August, but will they realise any of the fear that have led to a share price slump?
Although it has recovered a little in the past week, the HSBC price is still down 15% over the past 12 months, to 631p. And it’s all been down to expectations of a Chinese slowdown as that growing giant of an economy has been overheating and is moving more towards a private-led model.
But the answer to my question is no. At least, not with economic growth in the People’s Republic still steaming ahead at an annual rate of 7.5%.
Growth!
In fact, the City’s analysts have an 8% growth in earnings per share (EPS) forecast for the full year to December 2014, with a further 9% tentatively suggested for 2015. And that would follow a strong, if slightly volatile, few years for the Hong Kong based giant — it’s currently the second-biggest company in the FTSE 100 with a market cap of almost £119bn.
In its first-quarter update released in May, HSBC told us that reported pre-tax profit had fallen by 20% compared to Q1 2013, to $6,785m. The underlying pre-tax profit figure was better, but still showed a 13% fall to $6,621m.
EPS dipped 21% to 27 cents, but the first-quarter dividend was held at 10 cents per share.
The profit fall was to a large extent due to a strong first quarter in 2013, with chief executive Stuart Gulliver telling us “Whilst revenue was lower than the previous year’s first quarter, which benefited from a number of specific items, we have seen progress in revenue over the trailing quarters“.
And since then we’ve had positive updates from several HSBC subsidiaries, including HSBC Bank Malaysia and The Saudi British Bank, both of which reported rises in profits.
Great dividend yield
Whatever the coming results say, it could pay to be aware of a couple of key fundamentals in advance. Firstly, forecasts put HSBC shares on a forward P/E of 11.6 for the full year, dropping to 10.6 for 2015 — that’s perhaps not especially low for a bank right now, but it does compare favourably to the FTSE 100’s long-term average of 14.
And the shares look better value when we examine dividend forecasts. After providing investors with a 4.4% yield last year, HSBC is on for 5% this year after that share price fall. And if forecasts prove accurate, we should even seen 5.4% next year.