While most bank stocks have fallen in 2022, HSBC Holdings (LSE: HSBA) has risen. Lloyds Banking Group is down 15% in 12 months, and Barclays has fallen 27%. But the HSBC share price is up 9%. And its dividends look strong and progressive too.
The five-year picture is quite different though. Over that timescale, HSBC shares are down 37%, just ahead of Lloyds with a 40% loss. Barclays has fallen 21%.
It does suggest that different events are likely to treat individual bank shares differently. That’s not surprising, given the varied focus of these three. With its concentration on China and the Far East, HSBC is better insulated from the UK’s domestic problems, and from Europe-wide supply difficulties.
Q3 results
HSBC does still have some worldwide exposure as its third-quarter update shows. The results include a $2.4bn impairment related to its operations in France. And that contributed to profit after tax falling by $1.7bn to $2.6bn.
But on an adjusted basis, HSBC puts its post-tax profit at $6.5bn in the quarter, up $1bn.
There’s a similar story with revenue. The reported figures shows a 3% decline to $11.6bn, but a lot of that is due to the planned disposal of HSBC’s French retail operations. Again, adjusted revenue shows a gain, up 28% to $14.3bn.
Margins
In the quarter, the bank’s net interest margin rose by 38 basis points to 1.57%. So at least someone’s doing well from rising interest rates.
Over the nine months, adjusted revenue rose 11% to $40bn, while adjusted profit after tax is up a modest $0.1bn to $17.2bn.
The big question is whether the HSBC share price makes it a buy now. On fundamental ratios, I think it might.
Dividends
Forecasts suggest a 5% dividend yield for 2022, and puts the stock on a price-to-earnings (P/E) multiple of around eight. I find that dividend yield attractive, but it’s nothing compared to what analysts think the future should bring. They see it rising to a whopping 8% in 2023.
I’m always wary of forecasts, so I wouldn’t expect to see 8% until we get well into next year. But we’re so close to the end of the current year that I reckon the 2022 forecast must be reasonably close now. And HSBC’s full-year outlook supports some optimism.
The bank has lifted its net interest income guidance to $32bn, and reckons it should hit at least $36bn in 2023. Everything else seems to be largely unchanged and steady.
Chinese risk
While HSBC’s Asian focus helps reduce the impact of Western austerity, it does bring risks too. China’s zero-Covid policy appears to be harming the economy.
I think negative sentiment could continue for some time until China gets back to economic normality. I have my doubts that zero-Covid can actually work in the long term, as it just doesn’t seem possible to keep a huge population without immunity isolated from a highly contagious global virus.
On balance though, if I didn’t already have enough financial sector exposure, I’d put HSBC on my ‘to buy’ list.