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HSBC Targets Higher-Return Growth: Can the Stock Keep Climbing?
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Key Takeaways
HSBC's all four businesses are growing and generating returns above minimum targets.
HSBC's trade loans rose 30% to $120B, while second-quarter trade revenues increased 13% to $800M.
HSBC targets at least 17% ROTE through 2028 and raised 2026 banking NII guidance to at least $46B.
HSBC Holdings (HSBC - Free Report) is sharpening its growth strategy around businesses where it already has scale and competitive advantages, while using exits and simplification savings to fund expansion.
Last week, at the Barclays Global Financial Services Conference, chief financial officer Pam Kaur said that all four of HSBC’s businesses are growing and generating returns above the minimum targets set earlier this year. The company’s near-term investment priorities include Hong Kong, wealth management, data and AI, U.K. small and midsize enterprises, and wholesale transaction banking across foreign exchange, trade, payments and securities services.
Hong Kong, Wealth and Trade Drive HSBC’s Expansion
Hong Kong remains central to the bank’s expansion plan. HSBC’s franchise there continues to benefit from customer acquisition, cross-border flows and wealth activity. Pam Kaur mentioned new-to-bank customer additions in July and August remained around the first-half average, while second-quarter net new money in wealth reached $22 billion, equivalent to an annualized growth rate of 8%. This builds on HSBC’s already sizable Hong Kong franchise, where it added more than 1.1 million new-to-bank customers and opened five new Wealth Centers in 2025. The full ownership of Hang Seng Bank is likely to deepen that position. Management expects about $900 million of value creation from synergies, while Hang Seng’s new-to-bank customer flow doubled in the second quarter.
Trade finance is another expansion engine. HSBC said Asian export growth is supporting stronger demand for short-term commercial lending as clients adjust supply chains. Trade loans rose 30% year over year to $120 billion, while trade revenues increased 13% to $800 million in the second quarter. In the U.K., HSBC is focusing investment on SME banking, trade, international banking and technology-led customer journeys. The ring-fenced U.K. bank generated a 21% return on tangible equity, with revenue up 5%, lending up 7% and deposits up 4%.
Importantly, HSBC is trying to self-fund much of this expansion. The bank has announced 15 business or market exits since the start of 2025. Those businesses represent roughly $1.1 billion of costs and about $2 billion of revenue. Management intends to redeploy the released cost base into higher-return core businesses, though the revenue drag will arrive faster than some reinvestment benefits. HSBC also raised its organizational simplification savings target to $2 billion from $1.5 billion. The strategy is therefore less about broad geographic expansion and more about concentrating capital, technology and talent in franchises with stronger returns.
The financial backdrop supports that approach. HSBC reiterated its target for revenue growth to rise to 5% year over year by 2028 and for return on tangible equity of at least 17% through 2028, excluding notable items. It also lifted 2026 banking net interest income guidance to at least $46 billion.
Capital generation remains strong, giving HSBC considerable flexibility in how it deploys excess resources. Management has maintained a clear capital-allocation hierarchy, with a 50% dividend payout ratio as the first priority, followed by investment in organic growth opportunities that can generate attractive returns within the bank’s risk appetite. Beyond those needs, HSBC continues to favor share buybacks as its preferred method of returning surplus capital to shareholders, supporting both shareholder distributions and per-share value creation while preserving capacity to fund growth.
Can HSBC Shares Extend Their Rally?
HSBC’s shares have delivered a strong performance so far this year, gaining 31.2% and outperforming the industry’s 19.1% rise. The stock has also fared better than peers such as Barclays (BCS - Free Report) and UBS Group AG (UBS - Free Report) , which declined 0.6% and gained 10.2%, respectively, over the same period.
YTD Price Performance
Image Source: Zacks Investment Research
With HSBC closing within about 5% of its 52-week high in the latest trading session, some of the optimism surrounding its growth strategy may already be reflected in the share price.
Despite the impressive rally, HSBC’s valuation remains reasonable. The stock is currently trading at a forward 12-month price-to-earnings (P/E) multiple of 10.93X, slightly below the industry average of 11.19X. The below-industry valuation suggests the stock’s strong year-to-date gains have not pushed its multiple significantly above sector levels, making the valuation supportive if operating momentum continues.
P/E F12M
Image Source: Zacks Investment Research
Among its peers, Barclays trades at a forward 12-month P/E multiple of 7.84X, while UBS Group trades at 11.81X. Thus, HSBC commands a substantial premium to Barclays but remains less expensive than UBS Group.
The earnings outlook also remains supportive. The Zacks Consensus Estimate for HSBC’s 2026 earnings indicates a 13.4% year-over-year increase, while earnings in 2027 are expected to rise another 14.2%. Over the past 30 days, the consensus estimate for 2026 earnings has edged down to $8.56 per share, while the 2027 estimate has moved slightly higher to $9.77.
Earnings Estimates
Image Source: Zacks Investment Research
Further upside in HSBC shares will likely depend on the bank’s ability to sustain wealth inflows, successfully integrate Hang Seng Bank and maintain healthy growth across trade finance and U.K. lending. Progress toward its cost-saving targets and evidence that investments in core businesses can offset revenues lost through market exits would further strengthen the earnings outlook.
At the same time, execution risks remain. HSBC faces potential pressure from interest-rate volatility, credit deterioration in selected portfolios and the timing gap between revenue lost through exits and returns from reinvestment. The strong rally in the stock also raises the bar for future results, making consistent delivery against management’s revenue growth, return and cost targets increasingly important.
Overall, HSBC’s operating momentum, earnings growth prospects and relatively reasonable valuation provide support to the investment case. However, with the shares already trading near their 52-week high, the next leg of the rally will likely depend on management translating its focused expansion strategy into sustained earnings growth while maintaining cost and capital discipline.
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HSBC Targets Higher-Return Growth: Can the Stock Keep Climbing?
Key Takeaways
HSBC Holdings (HSBC - Free Report) is sharpening its growth strategy around businesses where it already has scale and competitive advantages, while using exits and simplification savings to fund expansion.
Last week, at the Barclays Global Financial Services Conference, chief financial officer Pam Kaur said that all four of HSBC’s businesses are growing and generating returns above the minimum targets set earlier this year. The company’s near-term investment priorities include Hong Kong, wealth management, data and AI, U.K. small and midsize enterprises, and wholesale transaction banking across foreign exchange, trade, payments and securities services.
Hong Kong, Wealth and Trade Drive HSBC’s Expansion
Hong Kong remains central to the bank’s expansion plan. HSBC’s franchise there continues to benefit from customer acquisition, cross-border flows and wealth activity. Pam Kaur mentioned new-to-bank customer additions in July and August remained around the first-half average, while second-quarter net new money in wealth reached $22 billion, equivalent to an annualized growth rate of 8%. This builds on HSBC’s already sizable Hong Kong franchise, where it added more than 1.1 million new-to-bank customers and opened five new Wealth Centers in 2025. The full ownership of Hang Seng Bank is likely to deepen that position. Management expects about $900 million of value creation from synergies, while Hang Seng’s new-to-bank customer flow doubled in the second quarter.
Trade finance is another expansion engine. HSBC said Asian export growth is supporting stronger demand for short-term commercial lending as clients adjust supply chains. Trade loans rose 30% year over year to $120 billion, while trade revenues increased 13% to $800 million in the second quarter. In the U.K., HSBC is focusing investment on SME banking, trade, international banking and technology-led customer journeys. The ring-fenced U.K. bank generated a 21% return on tangible equity, with revenue up 5%, lending up 7% and deposits up 4%.
Importantly, HSBC is trying to self-fund much of this expansion. The bank has announced 15 business or market exits since the start of 2025. Those businesses represent roughly $1.1 billion of costs and about $2 billion of revenue. Management intends to redeploy the released cost base into higher-return core businesses, though the revenue drag will arrive faster than some reinvestment benefits. HSBC also raised its organizational simplification savings target to $2 billion from $1.5 billion. The strategy is therefore less about broad geographic expansion and more about concentrating capital, technology and talent in franchises with stronger returns.
The financial backdrop supports that approach. HSBC reiterated its target for revenue growth to rise to 5% year over year by 2028 and for return on tangible equity of at least 17% through 2028, excluding notable items. It also lifted 2026 banking net interest income guidance to at least $46 billion.
Capital generation remains strong, giving HSBC considerable flexibility in how it deploys excess resources. Management has maintained a clear capital-allocation hierarchy, with a 50% dividend payout ratio as the first priority, followed by investment in organic growth opportunities that can generate attractive returns within the bank’s risk appetite. Beyond those needs, HSBC continues to favor share buybacks as its preferred method of returning surplus capital to shareholders, supporting both shareholder distributions and per-share value creation while preserving capacity to fund growth.
Can HSBC Shares Extend Their Rally?
HSBC’s shares have delivered a strong performance so far this year, gaining 31.2% and outperforming the industry’s 19.1% rise. The stock has also fared better than peers such as Barclays (BCS - Free Report) and UBS Group AG (UBS - Free Report) , which declined 0.6% and gained 10.2%, respectively, over the same period.
YTD Price Performance
Image Source: Zacks Investment Research
With HSBC closing within about 5% of its 52-week high in the latest trading session, some of the optimism surrounding its growth strategy may already be reflected in the share price.
Despite the impressive rally, HSBC’s valuation remains reasonable. The stock is currently trading at a forward 12-month price-to-earnings (P/E) multiple of 10.93X, slightly below the industry average of 11.19X. The below-industry valuation suggests the stock’s strong year-to-date gains have not pushed its multiple significantly above sector levels, making the valuation supportive if operating momentum continues.
P/E F12M
Image Source: Zacks Investment Research
Among its peers, Barclays trades at a forward 12-month P/E multiple of 7.84X, while UBS Group trades at 11.81X. Thus, HSBC commands a substantial premium to Barclays but remains less expensive than UBS Group.
The earnings outlook also remains supportive. The Zacks Consensus Estimate for HSBC’s 2026 earnings indicates a 13.4% year-over-year increase, while earnings in 2027 are expected to rise another 14.2%. Over the past 30 days, the consensus estimate for 2026 earnings has edged down to $8.56 per share, while the 2027 estimate has moved slightly higher to $9.77.
Earnings Estimates
Image Source: Zacks Investment Research
Further upside in HSBC shares will likely depend on the bank’s ability to sustain wealth inflows, successfully integrate Hang Seng Bank and maintain healthy growth across trade finance and U.K. lending. Progress toward its cost-saving targets and evidence that investments in core businesses can offset revenues lost through market exits would further strengthen the earnings outlook.
At the same time, execution risks remain. HSBC faces potential pressure from interest-rate volatility, credit deterioration in selected portfolios and the timing gap between revenue lost through exits and returns from reinvestment. The strong rally in the stock also raises the bar for future results, making consistent delivery against management’s revenue growth, return and cost targets increasingly important.
Overall, HSBC’s operating momentum, earnings growth prospects and relatively reasonable valuation provide support to the investment case. However, with the shares already trading near their 52-week high, the next leg of the rally will likely depend on management translating its focused expansion strategy into sustained earnings growth while maintaining cost and capital discipline.
At present, HSBC carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.