HSBC Gains 18.3% So Far This Year: How to Play the Stock?

HSBC Holdings plc HSBC shares have gained 18.3% so far this year, outperforming the S&P 500 Index’s 1.2% rise. While the stock has underperformed its industry’s growth of 22.2%, it has performed better than its peers, UBS Group AG UBS and Mitsubishi UFJ Financial Group, Inc. MUFG. The UBS stock has gained 4.2%, whereas shares of MUFG have rallied 14.2% in the same time frame.Price Performance Image Source: Zacks Investment Research Does the HSBC stock have more upside left despite showing recent strength in share price? Let us find out.What’s Aiding HSBC’s Performance?Asia Expansion Strategy: HSBC has consistently undertaken measures to enhance its performance, with a focus on building operations in Asia. The company aims to become a top bank for high-net-worth and ultra-high-net-worth clients in the region. Over half of its business is now centered in Asia.In India, HSBC re-launched its private banking business and obtained approval to open bank branches in 20 new cities. Last year, the company announced a partnership with Bajaj Allianz General Insurance in India to bolster its insurance solutions business.In mainland China, HSBC is growing its wealth business through lifestyle-focused centers, acquisitions like Citigroup’s retail wealth arm, digital upgrades and talent hires.HSBC has acquired 100% of the issued share capital of AXA Insurance in Singapore and L&T Investment Management Limited.These initiatives are expected to help HSBC strengthen its position in the Asia markets, thus aiding bottom-line growth.Restructuring Efforts: HSBC has been engaged in restructuring efforts to enhance operational efficiency. In October 2024, the company announced an initiative to streamline its organizational structure, which became effective on Jan. 1, 2025. HSBC aims to achieve $1.5 billion of annualized savings by 2026-end.The company will likely incur $1.8 billion in total severance and other upfront charges by the end of next year to execute its business simplification efforts. It also plans to reallocate an additional $1.5 billion of costs from non-strategic activities to priority growth areas over the medium term.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.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.Solid Capital 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.Given the solid capital position and lower debt-equity ratio than the industry, the company has been rewarding its shareholders consistently. In 2024, HSBC returned $26.9 billion to shareholders through dividends and repurchases. The company expects a dividend payout ratio of 50% for 2025. Further, it intends to initiate a share repurchase program of up to $3 billion, which will likely be completed by July 30, 2025.What’s Hurting HSBC’s GrowthRising Expense Base: Over the years, HSBC has undertaken several measures to improve efficiency by divesting/closing non-core businesses. Driven by these efforts, the bank was able to control expenses in the past.However, operating expenses increased in 2024. Costs are expected to remain high in the near term, given the company’s focus on growing market share in the U.K. and Asia, as well as strengthening digital capabilities globally. HSBC expects target-based operating expenses to increase 3% in 2025.Muted Revenue Growth: Revenue generation at HSBC has been subdued over the past several quarters. While the interest rate environment across the world has improved, the financial impacts of the challenging macroeconomic backdrop continue to weigh on the company’s top-line growth.Though revenues were stable in 2024 and increased in 2023, the metric recorded a negative compound annual growth rate of 2.7% over the three years ended 2022. Not-so-impressive loan demand and a tough macroeconomic environment in many of its markets are major headwinds.Revenue Trend Image Source: Zacks Investment Research How to Approach HSBC Stock NowSupported by its business simplification efforts, along with a strong capital position and a solid global network, HSBC is well-positioned for growth. The company’s efforts to expand in Asia will aid profitability in the near term.Revenue Estimates Image Source: Zacks Investment Research Earnings Estimates Image Source: Zacks Investment Research However, rising operating expenses amid growth initiatives will likely hurt HSBC’s bottom line. Muted revenues, in light of subdued loan demand and a challenging operating backdrop, remains another concern.Hence, investors should not rush to buy the HSBC stock now; instead, they should keep this Zacks Rank #3 (Hold) stock on their radars and wait for an attractive entry point. Those who already own the HSBC stock in their portfolio can hold on to it because it is less likely to disappoint over the long term, given its business simplification efforts and Asia expansion strategy.You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in the coming year. While not all picks can be winners, previous recommendations have soared +112%, +171%, +209% and +232%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report UBS Group AG (UBS): Free Stock Analysis Report HSBC Holdings plc (HSBC): Free Stock Analysis Report Mitsubishi UFJ Financial Group, Inc. (MUFG): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks