Stock market

What is happening to the HSBC share price?

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On Tuesday (April 30). HSBC (LSE:HSBA) share price rose after positive earnings report. However, there are other things going on. Let’s take a closer look at the whole picture.

HSBC’s earnings beat.

HSBC beat market expectations for the first quarter of the year. An ‘earnings beat’ often results in a share price being pushed upwards unless there is some unfavorable guidance — for the next quarter — or a change in dividend or buyback policy.

The UK’s biggest listed bank reported a 1.8% drop in first-quarter profit to $12.7bn (£10bn), but some softening compared with the first quarter of 2023 was expected. However, the results were still better than expected. Revenue came in at $20.8bn, marking a strong performance compared to the average forecast of around $16.9bn.

Additionally, HSBC announced a $3bn share buyback, and approved a special dividend of 21¢ per share plus a first interim dividend of 10¢ per share. The special gain came as the increasingly Asia-focused bank completed the sale of its Canadian banking unit for $9.96bn.

HSBC CEO resigns

The earnings report coincided with a surprise announcement that HSBC Group Chief Executive Noel Quinn will step down after five years in the job. His resignation comes amid deteriorating relations between the West, particularly the US, and China, and follows a strategic shift initiated by Quinn to invest more in the company’s Asia business.

Deteriorating relations between China and the United States threaten to undo much of Quinn’s hard work. In a conference call note, and perhaps reminiscent of Liverpool FC manager Jurgen Klopp’s comments a few months earlier, Quinn said “In doing this you have to give 100% if not 120% of your energy, your mindset has to play its part.

Generally, this will have a negative impact on the share price. However, Quinn said he will remain in the role until a suitable replacement is found. His announcement doesn’t seem to be deterring the stock.

China signaled support for the property market.

HSBC’s exposure to China’s property market represents less than 2% of its total loans, but it has held the stock over the past 18 months. Last year, I also read some US articles suggesting that HSBC was uninvestable because of this China exposure.

On April 30, China’s Politburo said it would explore measures to sell the country’s unsold homes and reduce the overall cost of borrowing. Details were unclear, but some further support for the sector could offset the bearish sentiment we’ve seen over the past 18 months.

My view on HSBC

HSBC stock has actually been very volatile over the past 12 months, especially considering it’s one of the UK’s largest companies by market cap. It offers a 7.7% dividend yield — which is huge — and currently trades at 7.3 times earnings. It appears to be trading around 6.7 times forecast earnings for 2024.

Personally, while I think HSBC is an attractive option, I opted for it. Barclays, Lloyd’sAnd Antisa Sanpolo. I think they offer better value.

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