HSBC’s stock (NYSE: HSBC) fared well this year, rising by about 11% since early January. This compares to rival Barclays (NYSE: BCS) stock which has gained almost 15% over the same period and JP Morgan (NYSE: JPM) which remains up by about 9% over the same period. So what’s happening with HSBC and what are some of the trends that will drive the stock in 2025?
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HSBC’s financials have remained reasonably strong. For 2024, HSBC saw pre-tax profits come in at $32.3 billion, up 6% year-over-year on a reported basis. Over the most recent quarter, banking net interest income, which is the main driver of revenues, has been trending lower. While elevated interest rates in 2023 enabled HSBC to earn more on its $1.7 trillion-plus deposit base, the metric has been trending lower as interest rates soften. Although the U.S. Federal Reserve, which typically sets the tone for interest rates globally, has signaled a slower pace of rate cuts for 2025, HSBC could see some pressure. The bank has guided banking net interest income of around $42 billion in 2025, down by about 4% compared to 2024.
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 18% on a constant currency basis in 2024, with the Asian business rising 32%. 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.
Is HSBC Stock Attractive?
HSBC is one of a handful of stocks that have increased their value in each of the last 4 years, but that still wasn’t enough for it to consistently beat the market. Returns for the stock were 21% in 2021, 8% in 2022, 39% in 2023, and 34% in 2024. The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, is less volatile. And it has comfortably outperformed 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. Given the current uncertain macroeconomic environment around rate cuts and multiple wars, could HSBC face a similar situation as it did in 2021 and underperform the S&P over the next 12 months – or will it see a strong jump?There are a couple of reasons for optimism about HSBC. First, its valuation remains reasonable, 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 announced a $2 billion share repurchase plan set to be completed by the end of Q1 2025, which 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. However, the wealth division, despite its growth potential, currently contributes only about 11% of HSBC revenues. On the other hand, HSBC’s core net interest income (NII) remains under pressure, 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.
| Returns | Feb 2025 MTD [1] |
Since start of 2024 [1] |
2017-25 Total [2] |
| HSBC Return | 6% | 51% | 117% |
| S&P 500 Return | 1% | 28% | 173% |
| Trefis Reinforced Value Portfolio | -7% | 15% | 680% |
[1] Returns as of 2/25/2025
[2] Cumulative total returns since the end of 2016
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
