Monday May 21, 2012
by Mark Skousen, editor High-Income AlertBased in Britain -- but founded in 1865 as Hong Kong and Shanghai Banking --
HSBC Holdings (
HBC) is one of the world’s largest financial institutions. We consider it an excellent investment at current levels.
HSBC helps more than 89 million customers with saving, checking, credit cards, mortgages, investment banking and wealth management services. But of particular interest, nearly one third of its business comes from China. And that percentage is only likely to grow.
The bank enjoys huge economies of scale, has local branches and contacts spread throughout the country, and has been aggressively acquiring stakes in other Chinese financial companies such as Ping An Insurance, China’s second-largest life insurance company.
Like so many banks, HSBC has taken its lumps in the earnings department lately. In the most recent quarter, earnings fell 27% on flat revenue.
But the savvy investor looks forward not back. HSBC is likely to earn $5.50 a share this year and more than $7 a share next year. That forecast makes the stock awfully cheap at around seven times prospective earnings.
The bank just wrapped up the sale of its U.S. credit card business to Capital One. This divestiture is part of HSBC’s long-term strategy to reduce expenses up to $3.5 billion by next year.
I expect the bank to earn $5.35 a share this year and more than $7 next. In the meantime, we’re collecting a 4% dividend yield.
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