HSBC Stock Review: Mixed Signals Ahead for Investors

HSBC stock has experienced an 11% rise this year, though it may face pressures in 2025 as net interest income dips. Growing reliance on fee-based growth brings both challenges and opportunities. Analysts remain cautiously optimistic about HSBC's future prospects.

Date: 27-02-2025

AI Rating: 5

Performance Overview

HSBC has shown a notable performance since early January with a stock rise of about 11%. However, its performance has lagged slightly behind competitors like Barclays and JP Morgan. While the stock has historically increased over the last four years, it's essential to look at the underlying financials that may impact its future performance.

Net Income and Earnings

For 2024, HSBC reported pre-tax profits of $32.3 billion, which represents a 6% increase year-over-year. This suggests HSBC is maintaining profitability, although the company's net interest income, a critical revenue driver, has been trending lower.

Revenue Insights

HSBC's revenue from its Wealth and Personal Banking division indicated a positive growth trajectory, with an 18% increase in 2024 on a constant currency basis, led by a significant 32% increase in the Asian markets. Despite this growth, net interest income, which constitutes roughly half of HSBC's total revenue, remains under pressure, impacting overall revenue growth and potentially limiting the stock's upward movement.

Future Outlook

Looking ahead, HSBC is guiding for a banking net interest income of around $42 billion in 2025, marking a decline of approximately 4% from 2024. This forecast reflects potential challenges from softening interest rates. Furthermore, HSBC has acknowledged that it might face a situation similar to 2021, where it could underperform against the S&P 500 due to macroeconomic uncertainties. The mention of the bank's targeted annualized savings of $1.5 billion by the end of 2026 indicates a focus on efficiency, which may help mitigate some of the pressures on net interest income.

Conclusion

Despite the mixed signals regarding its future performance, with ongoing reliance on fee-based growth and strategies aimed at improving efficiency, HSBC maintains a reasonable valuation. It is essential for investors to weigh these positives against the challenges that could affect profitability and stock performance in the near term.

Stocks: HSBC