Here’s how the HSBC share price reached an all-time high… and what might be next

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The HSBC (LSE: HSBA) share price last week hit a record high of 1,398p, capping a stunning run for one of Britain’s biggest banks.

Over the past year the shares are up 73.5%, and they’ve surged about 220% over five years.

What’s driving the growth?

That kind of climb usually means something’s gone very right. Investors seem to have warmed to HSBC after a long spell when the bank felt out of favour.

Key factors driving growth include:

  • Growing focus on Asia.
  • Rising interest income.
  • Hefty share buybacks.

The recent numbers help explain the excitement.

Revenue’s actually down 9.97% year on year, but net margins are still a healthy 20.57%, showing the bank’s turning a good chunk of what it brings in into profit.

The dividend yield sits at 4.12%, which is appealing versus cash savings, even if it’s only mildly higher than the UK average. But valuation is where it might raise a few eyebrows. Its price-to-earnings ratio of 14.95 is the highest among the big FTSE 100 banks, which tells us a lot of optimism is already baked into the price.

That’s in sharp contrast to more domestic UK banks that often trade on single‑digit multiples. It reflects how the market sees HSBC as a higher‑quality, global operator rather than a plain‑vanilla high street lender.

Risks on the radar

The strong numbers mask potential trouble behind closed doors. Recently, head of banking in Europe and the Americas, Gerry Keefe, resigned – another senior departure after a major restructuring. Leadership changes at that level can slow decisions and unsettle staff, even with an interim boss in place.

On top of that, it faces more risk from the Middle East than most European rivals. Here are some analyst estimates for HSBC’s exposure in the region:

  • Roughly 4% of revenue.
  • Up to 9% of profit before tax.
  • Around 2% of the loan book.

Amid the current conflict, that adds an extra layer of geopolitical risk – even if most clients are large, highly-rated companies.

So what are the professionals saying? 

What the experts think

Analyst coverage is broadly positive but cautious. Recent data shows a mix of Buy and Hold ratings, with only a few Sells. Some brokers think the shares have run ahead of themselves, noting that average 12‑month price targets sit below the current level. 

Meanwhile, others think earnings upgrades and strong capital returns could push the price higher. Commentators have even floated the idea of the stock hitting 2,000p if momentum continues, though that would mean another big leg up from here.

Is HSBC a long-term buy?

For UK investors, the bottom line is simple: HSBC continues to offer appeal as an income‑paying global bank, but it’s no longer obviously cheap. Anyone buying today is paying up for quality, growth in Asia, and chunky dividends.

All the while, accepting the usual banking risks plus extra exposure to the Middle East.

For long‑term investors who can handle some ups and downs, it’s still deserving of consideration in a diversified ISA portfolio. But it probably belongs as one piece of the puzzle rather than the whole picture.

The post Here’s how the HSBC share price reached an all-time high… and what might be next appeared first on The Motley Fool UK.

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HSBC Holdings is an advertising partner of Motley Fool Money. Mark Hartley has positions in HSBC Holdings. The Motley Fool UK has recommended HSBC Holdings. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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