HSBC’s stock has seen a notable rise, fueled by its bold restructuring efforts and solid third-quarter performance, which have positioned the bank for continued growth. With these strategic moves, HSBC is not only streamlining its operations but also setting the stage for future expansion.
HSBC Holdings plc, based in the UK, is a holding company with operations spanning over 60 countries offering a diverse range of financial services. The company specializes in retail banking, commercial banking, investment banking, and wealth management. Through catering to various customers and facilitating exposure to different regulatory environments, the financial powerhouse has maintained a strong position in the market.
It encompasses personal banking services like savings and current accounts, credit cards, and personal loans. Commercial banking comprises business loans and a related set of trade finance solutions. The investment banking division concentrates on capital markets services and advisory solutions, along with the wealth management area, including investment products and insurance. The revenue sources include interest income from loans, fees for banking services, and commissions from investment activities.
This diversified customer base forms the identity of this global banking leader: individuals in search of personal banking, small and medium enterprises in search of business banking, large corporate customers with requirements for commercial banking, and high-net-worth individuals in pursuit of wealth management. The last would be classified into retail banking, corporate finance, and investment services with a strong presence across Asia Pacific, Europe, North America, and emerging markets. But while India’s manufacturing sector accelerated in October, HSBC and the rest of Britain’s banks are busy focusing on expanding in the strong US commercial banking market.
Regarding the restructuring phase of the company, the head of HSBC Holdings’ new global wholesale banking division expects the first round of senior-level job cuts within weeks. This step to optimize team structure, which may bring in savings of $300mn, came after persistent concerns that investors had over HSBC’s ability to thrive in a world of declining interest rates. Rising regional competitors and the expanding presence of fin-techs are steadily eroding the bank’s customer base.
Europe’s largest bank has also revealed a radical remodeling plan, subsuming its commercial and institutional banking under one division, to be headed by Michael Roberts, and creating a new group for international wealth and premier banking headed by Barry O’Byrne.
Elhedery, the finance chief, informed that the full-year results in February will provide more information to the investors about the implications of the changes. The geographical restructuring, which will be in operation as of 1 January 2025, will split the business into two distinct businesses, East and West, with Hong Kong and the UK set to be standalone regions.
The restructuring is a clever, strategic move intended to fuel further expansion. A stable third quarter and a low PE ratio confirm the undervalued nature of a stock that is getting ready for a new life. At these levels, it is worth accumulating.
HSBC is not on our latest list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 14 hedge fund portfolios held HSBC at the end of the second quarter which was 17 in the previous quarter. While we acknowledge the potential of HSBC as a leading AI investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as HSBC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article was originally published at Insider Monkey.
