HSBC Rides on Restructuring, Asia Expansion & Relatively High Rates

HSBC Holdings PLC HSBC remains well-positioned for growth on the back of restructuring initiatives, relatively higher interest rates and expansion efforts in Asia. However, rising costs and subdued revenue generation are headwinds. Nonetheless, a solid capital position enables sustainable capital distributions.Tailwinds for HSBCExpansion in Asian Region: HSBC has consistently undertaken measures to enhance its performance, with a focus on building operations in Asia. The company aims to become a top bank for high-net-worth and ultra-high-net-worth clients in the region. Aligning with this, in August 2024, the company announced a partnership with Bajaj Allianz General Insurance in India to bolster its insurance solutions business. Further, last year, the company acquired Citigroup’s retail wealth management business in China and SilkRoad Property Partners Group in Singapore. Moreover, it re-launched its private banking business in India and obtained approval to open bank branches in 20 new cities, which are at the center of expanding its wealth and international business.In 2022, HSBC acquired 100% of the issued share capital of AXA Insurance in Singapore and L&T Investment Management Limited. Further, the company secured multiple additional licenses to expand its operations in mainland China. These initiatives are likely to strengthen the company’s position in Asia, which constitutes more than half of its operations. Restructuring Efforts to Boost Efficiency: HSBC has been engaged in restructuring efforts to enhance its operational efficiency. In October 2024, the company announced an initiative to streamline its organizational structure, which became effective from Jan. 1, 2025. Driven by this restructuring initiative, the company aims to achieve approximately $1.5 billion of annualized savings by 2026-end. The company will likely incur nearly $1.8 billion in total severance and other upfront charges by the end of next year to execute business simplification efforts. It also plans to reallocate an additional approximately $1.5 billion of costs from non-strategic activities to priority growth areas over the medium term.In sync with this, the company announced the winding down of its investment banking activities in the U.K., Europe and the United States, and divestitures of its French life insurance arm, HSBC Assurances Vie (France) and private banking business in Germany. Apart from these, HSBC completed the sale of its businesses in the United States, Canada, New Zealand, Greece, Russia, Argentina and Armenia, as well as the retail banking operations in France and Mauritius. It also announced the planned sale of its business in South Africa.Solid Capital Position: HSBC has a strong capital position despite an uncertain macroeconomic backdrop. As of Dec. 31, 2024, the company’s capital ratios were strong, driven by continued capital generation. Further, it has long-term investment grade ratings of A+, A3 and A- from Fitch, Moody’s and Standard and Poor’s, respectively.Courtesy of its robust capital position and lower debt-equity ratio relative to its peers, the company has been rewarding its shareholders consistently. In 2024, HSBC returned $26.9 billion to shareholders through dividends and repurchases. The company expects a dividend payout ratio of 50% for 2025. Further, it intends to initiate a share buyback of up to $2 billion, which will be completed by April 29, 2025.HSBC currently carries a Zacks Rank #2 (Buy). Over the past six months, shares of the company have gained 28.6%, outperforming the industry’s growth of 10.2%.Image Source: Zacks Investment ResearchHowever, HSBC’s operating expenses rose in 2024 and are likely to remain elevated in the near term amid the company’s efforts to expand market share in the United Kingdom and Asia alongside initiatives to strengthen digital capabilities globally. Further, subdued revenue generation given a challenging operating backdrop, is another concern.Other Foreign Banking Stocks Worth ConsideringSome other top-ranked foreign banking stocks worth a look are Barclays PLC BCS and NatWest Group PLC NWG, each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks Rank #1 stocks here.The Zacks Consensus Estimate for BCS’ current-year earnings has been revised 2.5% upward in the past 30 days. The company’s shares have gained 28.7% over the past six months.The Zacks Consensus Estimate for NWG’s current-year earnings has been revised 7.6% north in the past month. Its shares have gained 29.8% over the past six months.Zacks' Research Chief Names "Stock Most Likely to Double"Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.This top pick is among the most innovative financial firms. With a fast-growing customer base (already 50+ million) and a diverse set of cutting edge solutions, this stock is poised for big gains. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.Free: See Our Top Stock And 4 Runners UpWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Barclays PLC (BCS): Free Stock Analysis Report HSBC Holdings plc (HSBC): Free Stock Analysis Report NatWest Group plc (NWG): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks