HSBC holdings (LSE: HSBA) shares jumped greater than 5% in morning buying and selling Wednesday (25 February), which means they’ve now greater than trebled over the previous 5 years. The driving force? One other cracking set of full-year outcomes.
The financial institution did truly report barely decrease revenue earlier than tax than the earlier yr. It’s down by $2.4bn to $29.9bn. However that’s principally attributable to a variety of one-off losses and impairments, partly by means of restructuring and streamlining prices, amounting to $4.9bn. And it’s higher than analysts had been anticipating.
HSBC reported a storming return on tangible fairness (RoTE) of 17.2%, excluding one-offs. And the financial institution expects RoTE to hit at the least 17% over the 2026 to 2028 interval, with persevering with annual income development. However the huge query is: are HSBC shares nonetheless good worth?
Picture supply: Getty Pictures
“Decisive action and swift execution”
CEO Georges Elhedery characterised HSBC’s exercise within the yr as being all about decisive motion and fast execution. He advised us: “Every of our 4 companies carried out nicely and we now have robust momentum throughout the financial institution.“
There’s one speedy standout for me. Internet curiosity earnings elevated in 2025, by $2.1bn to $34.8bn. That marks the distinction between what a financial institution pays out to savers and receives from debtors. And in occasions when inflation is falling and central banks are reducing charges, it often suffers a squeeze. It’s one thing to regulate in 2026 and the years forward.
The board introduced a full-year dividend of 75 cents (roughly 55.5p) per share. And meaning a 4.3% dividend yield on the HSBC share value on the earlier shut.
A valuation test
Diluted earnings per share of $1.20 (88.9p) put HSBC shares on a trailing price-to-earnings (P/E) ratio of over 15 now. Is that possibly a wealthy financial institution valuation in the meanwhile, with world economies nonetheless trying fragile? My intuition suggests it’s at the least totally valued. And renewed worldwide commerce and tariff uncertainty solely reinforces the thought.
Admittedly, analysts see the P/E dropping to 11 primarily based on 2026 forecasts, and 10.5 the yr after. And there needs to be a great probability of earnings predictions being upgraded now we’ve seen such a robust 2025. However HSBC remains to be on the prime finish of FTSE 100 financial institution valuations.
At Lloyds Banking Group, for instance, we now have P/E forecasts under 9 by 2027. However HSBC’s larger valuation would possibly make sense. It’s not uncovered to the identical single-country threat. And lots of traders will see China-region development, which largely drives HSBC, as having a brighter outlook.
What ought to traders do now?
I actually just like the banking sector, and I’ve lengthy seen HSBC as a great long-term funding candidate. And I feel I nonetheless do. I’m only a bit cautious now of the potential for competitors in worldwide banking — of the sort that UK-focused Lloyds doesn’t face.
I additionally worry a variety of present shareholders might take a look at their paper income — and resolve to show them into precise money by promoting. However for a long-term outlook, I reckon HSBC shares will in all probability nonetheless be value contemplating.
