Key Morningstar Metrics for HSBC Holdings
- Fair Value Estimate: GBX 1,090
- Morningstar Rating: ★★★
- Morningstar Economic Moat Rating: None
- Morningstar Uncertainty Rating: Medium
What We Thought of HSBC Holdings’ Earnings
HSBC’s third-quarter results reflected resilient net interest margins, leading to more optimism in the company’s guidance for net interest income and returns on tangible equity.
Why it matters: Overall performance and HSBC’s improved guidance are positive, but we still see headwinds to net interest income growth beyond 2025. Fee income growth remains promising over the medium term, but there are capital market risks that could be a speed bump in the near term.
- The stable NIM is a positive surprise. This implies that the bank’s Asian operations benefited as deposit costs fell faster than loan rates. However, with loan demand likely sluggish, we keep our outlook for NIM to ease from 1.57%, with a more gradual decline to 1.41% in 2029.
- HSBC sees opportunities from the acquisition of Hang Seng Bank to sell additional services and products and to strengthen its wealth business. This is in line with our prior view of a 4% accretion to valuation. If executed well, there is upside to HSBC’s ROTE to exceed its midteens target.
The bottom line: Given the more benign margin pressures, we raise our fair value estimate to USD 73/HKD 113/GBX 1,090 per share from USD 70/HKD 108/GBX 1,040. This represents a forward price/book of 1.5 times, which we think is supported by a forecast average return on tangible common equity of 14.3% through 2029.
- We think HSBC is fairly valued presently, but we see support from the resumption of its share buybacks in the second half of 2026 and continued stable dividends.
- We expect risks in its Hong Kong operations to be bottoming. Commercial real estate indicators show stabilizing occupancy levels and improving retail sales. We think incremental charges should be smaller, so we anticipate fewer negative surprises related to asset quality in Asia.
