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HSBC's Focus in the Asia Region Aids, Rising Expenses Ail
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HSBC Holdings plc (HSBC - Free Report) is expected to benefit from a solid capital position, ongoing efforts to focus on the Asia region and continuous improvement in operating efficiency through business restructuring. But increasing macroeconomic uncertainties and mounting expenses are major headwinds.
HSBC’s transformation plan (announced in 2020) is aimed at reshaping underperforming businesses, simplifying complex organizations, and reducing costs. As part of this initiative, the company incurred a total cost of $6.5 billion to achieve gross savings and it has realized gross savings of $5.6 billion till the last year and expects an additional $1 billion of savings this year.
HSBC has been undertaking several measures to bolster its performance, with a special focus on building operations in Asia, including Hong Kong and China. In sync with this, last year, the company acquired 100% of the issued share capital of AXA Insurance in Singapore and L&T Investment Management Limited. It also raised its ownership stake in HSBC Qianhai Securities Limited in April 2022 and plans to relaunch its private banking business in India.
While HSBC’s focus on profitable markets and improvement in operational efficiency resulted in manageable expense levels over the past years, the same is expected to rise in the near term on its growth initiatives and improving its digital capabilities across the world. For 2023, the company anticipates 3% growth in adjusted costs (the acquisition of SVB UK and the related investments internationally will likely add 1% to operating expenses), which includes the severance costs of $300 million.
Brexit's financial effects are expected to keep weighing on HSBC's revenue growth in the near term. Despite the improving global interest rate environment, the company’s reported revenues declined at a CAGR of 2.7% between 2019 and 2022. The bank’s revenue outlook remains positive but faces headwinds from increasing macroeconomic ambiguity in some of its markets and inflation risks.
The Zacks Consensus Estimate for HSBC’s current-year earnings has been revised 4.4% upwards over the past 30 days. The company currently carries a Zacks Rank #3 (Hold).
Over the past year, shares of the company have gained 28.9% compared with the 8.7% increase recorded by the industry.
The Zacks Consensus Estimate for BanColombia’s current-year earnings has been revised 2.5% upward over the past 30 days. Over the past three months, CIB’s shares have decreased 14.5%.
Banco Santander’s current-year earnings estimates have been revised 3.3% upward over the past 30 days. SAN’s shares have lost 7.3% over the past three months.
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HSBC's Focus in the Asia Region Aids, Rising Expenses Ail
HSBC Holdings plc (HSBC - Free Report) is expected to benefit from a solid capital position, ongoing efforts to focus on the Asia region and continuous improvement in operating efficiency through business restructuring. But increasing macroeconomic uncertainties and mounting expenses are major headwinds.
HSBC’s transformation plan (announced in 2020) is aimed at reshaping underperforming businesses, simplifying complex organizations, and reducing costs. As part of this initiative, the company incurred a total cost of $6.5 billion to achieve gross savings and it has realized gross savings of $5.6 billion till the last year and expects an additional $1 billion of savings this year.
HSBC has been undertaking several measures to bolster its performance, with a special focus on building operations in Asia, including Hong Kong and China. In sync with this, last year, the company acquired 100% of the issued share capital of AXA Insurance in Singapore and L&T Investment Management Limited. It also raised its ownership stake in HSBC Qianhai Securities Limited in April 2022 and plans to relaunch its private banking business in India.
While HSBC’s focus on profitable markets and improvement in operational efficiency resulted in manageable expense levels over the past years, the same is expected to rise in the near term on its growth initiatives and improving its digital capabilities across the world. For 2023, the company anticipates 3% growth in adjusted costs (the acquisition of SVB UK and the related investments internationally will likely add 1% to operating expenses), which includes the severance costs of $300 million.
Brexit's financial effects are expected to keep weighing on HSBC's revenue growth in the near term. Despite the improving global interest rate environment, the company’s reported revenues declined at a CAGR of 2.7% between 2019 and 2022. The bank’s revenue outlook remains positive but faces headwinds from increasing macroeconomic ambiguity in some of its markets and inflation risks.
The Zacks Consensus Estimate for HSBC’s current-year earnings has been revised 4.4% upwards over the past 30 days. The company currently carries a Zacks Rank #3 (Hold).
Over the past year, shares of the company have gained 28.9% compared with the 8.7% increase recorded by the industry.
Image Source: Zacks Investment Research
Stocks Worth Considering
A couple of foreign bank stocks worth considering are BanColombia (CIB - Free Report) and Banco Santander (SAN - Free Report) , both carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
The Zacks Consensus Estimate for BanColombia’s current-year earnings has been revised 2.5% upward over the past 30 days. Over the past three months, CIB’s shares have decreased 14.5%.
Banco Santander’s current-year earnings estimates have been revised 3.3% upward over the past 30 days. SAN’s shares have lost 7.3% over the past three months.