Stock of the day 31/07/2015 – HSBC Holdings PLC

Whilst Barclays, RBS and Lloyds have all posted (relatively impressive) figures this week, perhaps the most significant bank report comes on Monday, when HSBC reveals its half year results.

Compared to the growth (or in the case of RBS, stability) of those aforementioned banks, HSBC has had an incredibly erratic year. After opening 2015 at £6.14 HSBC had climbed to £6.30 towards the end of January; however, a leak in the middle of February showing the bank’s Swiss arm had helped certain wealthy clients in tax evasion and asset obfuscation helped carry the stock below the £6 mark, before a dismal full year report at the end of the month pushed it to £5.77. The report showed a 17% drop in profit to $18.7 billion, with the $2.4 billion in fines and settlements it saw in 2014 creating a ‘challenging year’ for the bank.


(Source: IT-Finance.com 31/07/2015)

Things didn’t improve across March, and by the middle of that month HSBC was languishing at £5.61. April, however, saw the stock leap away from those lows, despite French prosecutors expanding their investigation into the bank’s Swiss misbehaviour. The real surge came at the end of April, when HSBC announced it was considering moving its headquarters out of the UK, with Asia the most likely region for relocation. The decision to review the location of its HQ was ostensibly in response to a potential Brexit, but more realistically is a decision based on the bank levies and ring-fencing found in the UK. Regardless investors were practically drooling at the thought of HSBC leaving Britain, pushing the stock to a 7 month high of £6.59 in the process.

Pre-election jitters helped carry HSBC away from this peak, despite a decent set of first quarter figures which saw a 4% rise in profits to $7.1 billion but included another whack of money set aside for PPI misselling provisions. A little bump from the Tory election win couldn’t be sustained, and after a bit of late May stability HSBC kept tumbling throughout June as the bank announced it was to cut thousands of jobs globally. The Greek-related banking anxieties did HSBC no favours, causing the bank to at one point hit a 2 and a half year low of £5.44. The rest of July saw the stock continue its scatty form, with highs of £5.90 and lows of £5.64; HSBC is currently trading at £5.79 (IT-Finance.com, 31/07/2015).

With its half year results on Monday investors will be keen for any kind of clarity on the bank’s HQ issue, information which, if suggesting a UK-exit, could give HSBC’s stock a much-needed boost. In terms of actual figures, analysts are expecting revenue of $30.56 billion complimented by adjusted net income of $8.3 billion. HSBC has a consensus rating of ‘hold’ with an average target price of £6.44.