What’s Happening With HSBC Stock?

HSBC’s stock (NYSE: HSBC) fared reasonably well this year, rising by about 9% since early January.  This compares to rival  JP Morgan (NYSE: JPM) which remains up by about 5% over the same period. So what’s happening with HSBC and what are some of the trends that can drive the company’s performance going forward.

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Strong Q1 Earnings

HSBC’s financials have remained reasonably strong. The banking giant reported better-than-expected earnings for Q1 2025. While revenues declined 15% from last year to $17.65 billion, led by business disposals in Canada and Argentina, profits before tax came in at $9.48 billion, declining by 25% compared to last year, although they were well ahead of forecasts. However, profit before tax surged by nearly 317% compared to the previous quarter, reflecting strong sequential growth. Strong performances in the Wealth business, Foreign Exchange, and Debt and Equity Markets have been driving profits and revenue in recent quarters.

As an aside, market leadership is in fact one of the factors we consider in constructing the market-beating Trefis High Quality portfolio (HQ) – a strategy of 30 stocks that targets long-term value creation. HQ has outperformed the S&P 500 and achieved returns greater than 91% since inception.

Wealth Management Momentum

HSBC is increasingly relying on fee-based products in segments such as its Wealth and Personal Banking division to drive growth. Revenue for the Wealth business was up 21% year-over-year during Q1, led by strong business in Asia. HSBC has been increasingly focusing on wealthy customers in Asia, with its Hong Kong business seeing a 29% sequential growth in new customers. The Global Private Banking segment has also been faring well, driven by strong brokerage and trading activity in Asia. Asset management revenues have been driven by growing assets under management, positive market movements, and increased life insurance-related revenue.  Rising market volatility is also expected to help the wealth business to an extent as people increasingly seek out advisory services, while brokerage and trading businesses are also likely to benefit.

Trade War Risks

The banking giant cautioned that loan demand and credit quality may suffer going forward due to the broader impact of U.S. President Donald Trump’s tariffs and trade war. Although the earnings don’t yet reflect the full impact of the recently announced reciprocal tariffs, HSBC is a largely trade-focused banking company. During its earnings call in late April,  HSBC said that it was seeing a notable decline in transaction volumes along the U.S.-China corridor for sectors that were not exempt from tariffs. HSBC also said that an economic slowdown could have a low single-digit impact on its revenues for the fiscal year, while noting that it might see about $500 million in additional expected credit losses. That being said, the progress in U.S.-China trade negotiations over the last couple of days has raised hopes of easing tensions. 

HSBC Stock Good Value?

There are a couple of reasons for optimism about HSBC. First, its valuation remains fair, with the stock trading at just over 1x tangible book value (net assets minus goodwill). The bank is also focused on improving efficiency and cutting costs, targeting annualized savings of $1.5 billion by the end of 2026. In January, HSBC outlined plans to scale down its mergers and acquisitions and some equities businesses in Europe and the Americas, shifting focus to its more profitable Asian markets.

HSBC is doubling down on capital returns, having recently raised its share repurchase authorization to $3 billion, with the new buyback expected to be completed before its 2025 interim results. This could help support the stock price.  Additionally, the bank is aiming for a mid-teens return on average tangible equity between 2025 and 2027, which is above the industry average. On the other hand, HSBC’s core net interest income (NII) could remain under pressure due to lower interest rates, posing a challenge to overall revenue growth, as net interest income accounts for roughly half of the bank’s total revenue. See our analysis of HSBC’s valuation for a closer look at what’s driving our valuation for HSBC stock.

Preserve & Grow Wealth With Risk-Focused Quality Portfolios

While HSBC could provide steady growth, the Trefis HQ portfolio is focused on long-term value creation. With a collection of 30 stocks, it has a track record of comfortably outperforming the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics.

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