 |
| Dow | Nasdaq | About Us | Disclaimer |  |
RSS Feed |  |
Follow us on Twitter |
|
Featured Advisors |
Monday June 07, 2010
HSBC Holding (HBC): Bank on global growth
by Adrian Day, editor The Global Analyst
However, several stocks on our recommended list are at good buying levels. One such stock is HSBC Holdings (HBC), which we consider a core holding. 
Two trends are notable. First, the bank is repositioning itself in the U.S., even as it continues to run off residential mortgages, the business that has cost it billions of dollars in losses, with further to go in the process. HSBC is adding retail branches aimed primarily at U.S. small business and individuals with global business, a sector painfully underserved by most U.S. banks. Although it has seen significant deposit growth in recent years, it is still only 13th among U.S. banks by size of deposits. But it can gain loyal and profitable customers in the global business niche. Second, the center of gravity for the entire group is shifting back to Hong Kong, with many top executives moving there and more and more decisions being made there. It plans to list its shares in Shanghai in the not-too-distant future. The bank is well positioned for better times ahead, first as there is a fundamental recovery in profits after the Household Finance debacle, and second as it is particularly well positioned relative to other banks for the increased regulatory environment, and for Asian growth. The valuation metrics are reasonable—with an estimated p/e of 13 (quite moderate given the consistent, long-term growth in earnings), and a well-covered yield of 3.4%--more important is the solid balance sheet, with strong cash reserves and high core capital, as well as the bank’s fundamental ethos. CEO Michael Geoghegan recently summed up the banks’ philosophy. There is “nothing wrong” with a 19th century banking model, where banks held more in deposits than they lent out. With a loan-to-deposit ratio of 77%, the bank is considerably less leveraged than most. Learn more about this financial newsletter at Adrian Day's The Global Analyst. |
News Flash
|
|
Despite market declines—all markets around the world are now negative for year, most by between 10 and 20%-- valuations are not low enough for aggressive buying.