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Delving Beyond HSBC's Q1 Earnings: Should You Buy the Stock?
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HSBC Holdings (HSBC - Free Report) reported first-quarter 2025 results last week. Results benefited from higher adjusted revenues and relatively stable operating expenses. On the other hand, heightened uncertainty and weakness in the economic outlook owing to geopolitical tensions and higher trade tariffs led to a rise in expected credit losses and other credit impairment charges (ECL).
So now the question is, should investors think of buying HSBC stock at the moment? Let’s address this question by evaluating the company’s latest quarterly performance and long-term prospects.
Sneak Peek Into HSBC’s Q1 Performance
Adjusted Revenues Offer Support: Revenues (excluding notable items of $3.7 billion related to the disposals in Canadian and Argentine businesses last year) grew 7% year over year to $17.7 billion. The growth reflected higher fee and other income in the Wealth division. Further, adjusted net interest income (NII) increased on the back of lower funding costs.
Operating Expenses Reflect Impact of Business Restructuring: HSBC is taking a disciplined approach to cost management. As such, the first-quarter operating expenses were relatively stable at $8.1 billion. The completion of disposals in Canada and Argentina and a favorable impact from foreign currency translation were offset by restructuring and other related costs, as well as higher spending and investment in technology, and the impacts of inflation.
Credit Costs Remain a Concern: During the first quarter, the economic outlook deteriorated because of the tariff-related headwinds. HSBC reported ECL of $876 million, jumping 22% year over year. Of this, $150 million related to the heightened economic ambiguity.
HSBC’s Short and Medium-Term Outlook
For 2025, management expects banking NII of $42 billion, with lending likely to remain muted. Further, HSBC's operating expenses are expected to rise 3% on a target basis. Also, ECL charges as a percentage of average gross loans are expected to be between 30 and 40 basis points.
Over the medium term, HSBC expects loan growth to be in the mid-single-digit CAGR range.
HSBC expects a return on average tangible equity in the mid-teens from 2025 to 2027, excluding the impacts of notable items.
The company intends to manage the CET1 ratio within its medium-term target of 14-14.5%.
Progress on HSBC’s Strategic Business Overhaul Plan
In February 2025, HSBC announced a $1.5 billion cost-saving plan from the organizational simplification efforts by 2026. The company will likely incur nearly $1.8 billion in total severance and other upfront charges by the end of next year to implement business simplification efforts.
Separately, the bank announced plans to redeploy an additional $1.5 billion from the strategic reallocation of costs from non-strategic or low-returning activities into its core strategy, where it has competitive strength. In sync with this, HSBC is winding down its mergers and acquisitions and equity capital markets operations in the U.K., Europe and the United States, while maintaining a more focused presence in Asia and the Middle East. It is also progressing with divestments in Germany, South Africa, Bahrain and France, and has begun a strategic review of its business in Malta.
On the strategic growth opportunity front, HSBC plans to grow by strengthening its transaction banking, expanding internationally and building the wealth business, especially in Asia. It is focused on growing in the core markets, Hong Kong and the U.K., by supporting small and medium businesses, improving digital services and offering better products.
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.
HSBC’s Asia Pivot Strategy
HSBC is undertaking measures to bolster its performance, focusing on building operations across Asia. The company intends to position itself as a top bank for high-net-worth and ultra-high-net-worth clients in the region, constituting more than half of its operations.
HSBC is rapidly expanding its wealth business in mainland China by launching large, lifestyle-integrated wealth centers in major cities. It aims to deepen market presence through acquisitions (Citigroup’s retail wealth management portfolio in China), digital investments and hiring. With a focus on affluent clients, HSBC is enhancing services across Premier Banking, Private Banking and Asset Management to support long-term growth in Asia’s largest affluent market.
Further, HSBC is eyeing expansion in the lucrative Indian market. In January, it received approval from the Reserve Bank of India to open 20 new bank branches in major cities. At present, it operates 26 branches in 14 Indian cities. India's wealth market is growing rapidly, with ultra-high net worth individuals expected to soar 50% by 2028. In response, the company is expanding its services by launching Global Private Banking in 2023, acquiring L&T Investment Management in 2022 and enhancing Premier Banking in 2024.
HSBC’s Strong Balance Sheet Position
Despite the uncertain macroeconomic environment, HSBC’s capital position remains solid. As of March 31, 2025, the company’s capital ratios were strong, driven by steady capital generation. Further, it has investment grade long-term ratings of A+, A3 and A- from Fitch, Moody’s and Standard and Poor’s, respectively.
Given the solid capital position and lower debt-equity ratio compared with the industry, the company has been rewarding its shareholders consistently. In 2024, the company returned $26.9 billion to the shareholders through dividends and repurchases, while in 2023, it was $20.8 billion. The company expects a dividend payout ratio of 50% for 2025.
On April 25, HSBC completed the $2 billion share buyback plan announced with its full-year 2024 results in February. The company has initiated a new share repurchase program of up to $3 billion. The plan commenced after May 2 and will be completed by July 30, 2025.
HSBC shares have gained 14.6% so far this year compared with the industry’s rally of 15.2%. Meanwhile, its peers, Barclays (BCS - Free Report) and Banco Santander, S.A. (SAN - Free Report) , have performed impressively in the same time frame.
HSBC YTD Price Performance
Image Source: Zacks Investment Research
Now, let’s take a look at the value HSBC offers investors at current levels.
At present, HSBC is trading at 1.02X 12-month trailing price/tangible book (P/TB), above its five-year median of 0.74X. Meanwhile, the industry has P/TB TTM of 2.47X. Hence, the stock looks inexpensive compared with the industry average.
HSBC P/TB TTM
Image Source: Zacks Investment Research
Further, Barclays has a P/TB TTM of 0.69X and Banco Santander’s P/TB TTM is 1.21X. So, HSBC Group is trading at a massive premium compared with Barclays, while its shares are cheaper compared with Banco Santander.
How to Approach HSBC Stock Now?
Over the past seven days, the Zacks Consensus Estimate for 2025 earnings has been revised upward to $6.83, while for 2026, it has moved lower to $7.03.
Earnings Estimate Revision Trend
Image Source: Zacks Investment Research
The projected figures imply a rise of 5.1% and 2.9% for 2025 and 2026, respectively.
(Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)
Revenue generation at HSBC has been subdued over the past several quarters. While the interest rate environment across the world improved, the financial impact of the challenging macroeconomic backdrop continues to weigh on the company’s top-line growth. Not-so-impressive loan demand and a tough macroeconomic environment in many of its markets are concerning.
HSBC Sales Estimates
Image Source: Zacks Investment Research
HSBC’s business simplification and restructuring initiatives, along with its cost savings plan, are expected to drive growth in the upcoming period. Also, the cheap valuation makes the stock an attractive investment option.
However, the company’s subdued revenue growth expectations are concerning. Also, investors must keep an eye on the progress of the company’s strategic actions to drive earnings. Further, the impact of macroeconomic factors must be carefully evaluated before buying HSBC stock. Those who already own the stock can hold on to it because it is less likely to disappoint over the long term.
Image: Bigstock
Delving Beyond HSBC's Q1 Earnings: Should You Buy the Stock?
HSBC Holdings (HSBC - Free Report) reported first-quarter 2025 results last week. Results benefited from higher adjusted revenues and relatively stable operating expenses. On the other hand, heightened uncertainty and weakness in the economic outlook owing to geopolitical tensions and higher trade tariffs led to a rise in expected credit losses and other credit impairment charges (ECL).
So now the question is, should investors think of buying HSBC stock at the moment? Let’s address this question by evaluating the company’s latest quarterly performance and long-term prospects.
Sneak Peek Into HSBC’s Q1 Performance
Adjusted Revenues Offer Support: Revenues (excluding notable items of $3.7 billion related to the disposals in Canadian and Argentine businesses last year) grew 7% year over year to $17.7 billion. The growth reflected higher fee and other income in the Wealth division. Further, adjusted net interest income (NII) increased on the back of lower funding costs.
Operating Expenses Reflect Impact of Business Restructuring: HSBC is taking a disciplined approach to cost management. As such, the first-quarter operating expenses were relatively stable at $8.1 billion. The completion of disposals in Canada and Argentina and a favorable impact from foreign currency translation were offset by restructuring and other related costs, as well as higher spending and investment in technology, and the impacts of inflation.
Credit Costs Remain a Concern: During the first quarter, the economic outlook deteriorated because of the tariff-related headwinds. HSBC reported ECL of $876 million, jumping 22% year over year. Of this, $150 million related to the heightened economic ambiguity.
HSBC’s Short and Medium-Term Outlook
For 2025, management expects banking NII of $42 billion, with lending likely to remain muted. Further, HSBC's operating expenses are expected to rise 3% on a target basis. Also, ECL charges as a percentage of average gross loans are expected to be between 30 and 40 basis points.
Over the medium term, HSBC expects loan growth to be in the mid-single-digit CAGR range.
HSBC expects a return on average tangible equity in the mid-teens from 2025 to 2027, excluding the impacts of notable items.
The company intends to manage the CET1 ratio within its medium-term target of 14-14.5%.
Progress on HSBC’s Strategic Business Overhaul Plan
In February 2025, HSBC announced a $1.5 billion cost-saving plan from the organizational simplification efforts by 2026. The company will likely incur nearly $1.8 billion in total severance and other upfront charges by the end of next year to implement business simplification efforts.
Separately, the bank announced plans to redeploy an additional $1.5 billion from the strategic reallocation of costs from non-strategic or low-returning activities into its core strategy, where it has competitive strength. In sync with this, HSBC is winding down its mergers and acquisitions and equity capital markets operations in the U.K., Europe and the United States, while maintaining a more focused presence in Asia and the Middle East. It is also progressing with divestments in Germany, South Africa, Bahrain and France, and has begun a strategic review of its business in Malta.
On the strategic growth opportunity front, HSBC plans to grow by strengthening its transaction banking, expanding internationally and building the wealth business, especially in Asia. It is focused on growing in the core markets, Hong Kong and the U.K., by supporting small and medium businesses, improving digital services and offering better products.
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.
HSBC’s Asia Pivot Strategy
HSBC is undertaking measures to bolster its performance, focusing on building operations across Asia. The company intends to position itself as a top bank for high-net-worth and ultra-high-net-worth clients in the region, constituting more than half of its operations.
HSBC is rapidly expanding its wealth business in mainland China by launching large, lifestyle-integrated wealth centers in major cities. It aims to deepen market presence through acquisitions (Citigroup’s retail wealth management portfolio in China), digital investments and hiring. With a focus on affluent clients, HSBC is enhancing services across Premier Banking, Private Banking and Asset Management to support long-term growth in Asia’s largest affluent market.
Further, HSBC is eyeing expansion in the lucrative Indian market. In January, it received approval from the Reserve Bank of India to open 20 new bank branches in major cities. At present, it operates 26 branches in 14 Indian cities. India's wealth market is growing rapidly, with ultra-high net worth individuals expected to soar 50% by 2028. In response, the company is expanding its services by launching Global Private Banking in 2023, acquiring L&T Investment Management in 2022 and enhancing Premier Banking in 2024.
HSBC’s Strong Balance Sheet Position
Despite the uncertain macroeconomic environment, HSBC’s capital position remains solid. As of March 31, 2025, the company’s capital ratios were strong, driven by steady capital generation. Further, it has investment grade long-term ratings of A+, A3 and A- from Fitch, Moody’s and Standard and Poor’s, respectively.
Given the solid capital position and lower debt-equity ratio compared with the industry, the company has been rewarding its shareholders consistently. In 2024, the company returned $26.9 billion to the shareholders through dividends and repurchases, while in 2023, it was $20.8 billion. The company expects a dividend payout ratio of 50% for 2025.
On April 25, HSBC completed the $2 billion share buyback plan announced with its full-year 2024 results in February. The company has initiated a new share repurchase program of up to $3 billion. The plan commenced after May 2 and will be completed by July 30, 2025.
HSBC Stock’s Price Performance & Valuation Analysis
HSBC shares have gained 14.6% so far this year compared with the industry’s rally of 15.2%. Meanwhile, its peers, Barclays (BCS - Free Report) and Banco Santander, S.A. (SAN - Free Report) , have performed impressively in the same time frame.
HSBC YTD Price Performance
Image Source: Zacks Investment Research
Now, let’s take a look at the value HSBC offers investors at current levels.
At present, HSBC is trading at 1.02X 12-month trailing price/tangible book (P/TB), above its five-year median of 0.74X. Meanwhile, the industry has P/TB TTM of 2.47X. Hence, the stock looks inexpensive compared with the industry average.
HSBC P/TB TTM
Image Source: Zacks Investment Research
Further, Barclays has a P/TB TTM of 0.69X and Banco Santander’s P/TB TTM is 1.21X. So, HSBC Group is trading at a massive premium compared with Barclays, while its shares are cheaper compared with Banco Santander.
How to Approach HSBC Stock Now?
Over the past seven days, the Zacks Consensus Estimate for 2025 earnings has been revised upward to $6.83, while for 2026, it has moved lower to $7.03.
Earnings Estimate Revision Trend
Image Source: Zacks Investment Research
The projected figures imply a rise of 5.1% and 2.9% for 2025 and 2026, respectively.
(Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)
Revenue generation at HSBC has been subdued over the past several quarters. While the interest rate environment across the world improved, the financial impact of the challenging macroeconomic backdrop continues to weigh on the company’s top-line growth. Not-so-impressive loan demand and a tough macroeconomic environment in many of its markets are concerning.
HSBC Sales Estimates
Image Source: Zacks Investment Research
HSBC’s business simplification and restructuring initiatives, along with its cost savings plan, are expected to drive growth in the upcoming period. Also, the cheap valuation makes the stock an attractive investment option.
However, the company’s subdued revenue growth expectations are concerning. Also, investors must keep an eye on the progress of the company’s strategic actions to drive earnings. Further, the impact of macroeconomic factors must be carefully evaluated before buying HSBC stock. Those who already own the stock can hold on to it because it is less likely to disappoint over the long term.
HSBC currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.