Even after the recent sell-off, the HSBC (LSE:HSBA) share price has been on a spectacular run over the last five years, climbing by over 70%. Considering it’s one of the largest banks in the world with a market-cap of £156bn, that’s a pretty impressive display. So much so that the stock’s now trading ahead of its 2008 peak for the first time.
If HSBC continues this long-term upward trajectory and surpasses 960p, the bank will reach its highest-ever share price on record. And looking at the latest analyst forecasts, that might happen within the next 12 months.
Streamlining operations
A big part of the bank’s recent run-up has been the decision from management to cut down on complex or underperforming businesses. As such, its retail banking operations in France and Mauritius have been sold off along with its businesses in Russia, Argentina, Armenia, and, most recently, Canada.
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Not all these disposals were achieved at a profit. Argentina, for example, actually resulted in a $1bn loss. However, in the long term, management believes this initial pain is necessary. Looking to 2025, $300m of annualised cost savings have been unveiled by the newly appointed CEO, Georges Elhedery. This is part of a larger $1.5bn savings target to be achieved before the end of 2026, as Elhedery looks to maximise efficiency across the board.
What does this all mean for shareholders? The all-important return on tangible equity (RoTE) is now expected to reach the mid-teens between 2025 and 2027. That’s ahead of analyst expectations, but is this realistic? In my opinion, yes. In fact, stripping out all the one-time effects of the group’s disposals in 2024 puts HSBC’s underlying RoTE already at 16%.
With that in mind, it’s not so surprising that one analyst believes the HSBC share price could rise to as high as 1,196.36p over the next 12 months, setting a new record high in the process.
Taking a step back
The operational streamlining of 2024 was also matched with a welcome boost to its remaining operations, particularly the wealth management division. However, not everything was perfect.
Even with clever hedging strategies, HSBC’s net interest margin dropped from 1.66% to 1.56%. By comparison, rival bank Barclays achieved the opposite trend, reaching an average of 3.29%, up from 3.13% over the same period.
Could HSBC turn interest margins around? Possibly. But Elhedery has stated the interest rate environment “remains volatile and uncertain, particularly in the medium term”, which doesn’t spark a lot of confidence. That’s probably why another analyst is actually projecting the HSBC share price to fall to 797.83p by this time next year.
The bottom line
Elhedery’s only been in the corner office since February. As such, it’s too early to tell whether he will be a net positive for the bank. However, there’s no denying he has a clear vision of strategy that he’s wasting no time on implementing. And given he first joined HSBC in 2005, his strong understanding of the business undoubtedly gives him an advantage.
With that in mind, I’m cautiously optimistic for what’s to come. So for investors looking to gain exposure to the banking sector, HSBC may be worth a closer look.
