Last Update 17 Feb 26

Fair value Increased 1.75%

HSBA: Future Returns Will Depend On Cost Discipline And Return On Equity

HSBC Holdings' updated fair value has edged higher, supporting a modest uplift in the implied analyst price target to about £11.74, as analysts cite recent target increases, resumed coverage and upgrades following what they describe as good Q3 results and progress toward cost growth and return-on-equity goals.

Analyst Commentary

Recent research updates on HSBC point to a generally constructive tone, with several large firms revisiting their views after the latest Q3 report and revised internal targets.

Bullish Takeaways

Bullish analysts highlight the higher fair value and target prices, including the £13.20 target cited by Citi and the 130 GBp uplift from JPMorgan, as a sign that they see HSBC’s current valuation as leaving room for upside if execution stays on track.
The upgrade to Buy following what is described as a good Q3 report is tied to confidence that HSBC can keep cost growth to around 3% in 2025, which, if achieved, would support margin resilience and help protect returns.
Expectations that return on equity could reach at least 15% in 2025 are seen by bullish analysts as supportive of HSBC’s ability to justify higher multiples relative to its own history if those targets are met.
Resumed coverage and rating upgrades are framed as a vote of confidence in management’s current plan, with analysts pointing to clearer visibility on cost control and capital returns as key supports for the investment case.

Bearish Takeaways

The Equal Weight stance from one large firm signals that some bearish analysts, or at least more cautious ones, view HSBC as fairly valued near current levels, even with the updated fair value and price targets.
Cautious voices focus on execution risk around the 3% cost growth target for 2025, noting that any slippage on expenses could weigh on profitability and limit the case for further valuation re rating.
There is also some restraint around the 15% return on equity expectation, with bearish analysts flagging that if the bank falls short of this level, the stock could struggle to support the more optimistic price targets.
The mix of Buy and Equal Weight opinions suggests that, while the Q3 results are viewed as good, not all analysts are ready to treat them as a clear signal for sustained improvement in earnings quality or capital efficiency.

What's in the News

HSBC is preparing to award little or no bonuses to some bankers, according to a report that points to tighter pay outcomes for parts of the investment bank and related businesses (Bloomberg).
HSBC has agreed to pay €300m to settle a criminal and civil case in France linked to an alleged dividend tax scandal. The accord ends the French prosecutor's investigation without the bank admitting guilt and includes a €268m fine and about €30m in tax (Bloomberg).
Benin has hired a consortium of international banks, including HSBC, to arrange a potential sale of a dollar Sukuk bond and other debt securities. Investor meetings in London are scheduled to start on January 13 as part of the marketing process (Bloomberg).
HSBC is exploring options for its insurance unit in Singapore, including a possible sale that could value HSBC Life Singapore at more than US$1b. This is part of a broader review under CEO Georges Elhedery and follows prior disposals of life and custody businesses in Europe and North America (Key Developments).
HSBC has hired former Citigroup executive Ida Liu to run its global private banking business, succeeding interim CEO Gabriel Castello in that role (Key Developments).

Valuation Changes

Fair Value has risen slightly from £11.54 to about £11.74, indicating a modest uplift in the modelled estimate.
Discount Rate has edged higher from 10.06% to about 10.24%, implying a slightly higher required return in the updated assumptions.
Revenue Growth has moved marginally, from 8.71% to about 8.83%, reflecting a small adjustment in top line expectations expressed in $ terms.
Net Profit Margin is essentially unchanged, shifting from 37.97% to about 37.89% on a $ basis.
Future P/E has increased from about 11.25x to roughly 11.97x, which points to a slightly higher valuation multiple in the updated model.

Focus on Asian wealth management, digital innovation, and trade flows positions HSBC for higher-margin, resilient growth as it reallocates resources from weaker markets.
Strategic divestments and a strong deposit base in Asia underpin improved returns, operational efficiency, and sustained fee and interest income growth.
Heavy reliance on Asia, market volatility, commercial real estate risks, and rising investment costs may erode margins and constrain revenue growth amid persistent economic uncertainty.

Catalysts

About HSBC Holdings

Engages in the provision of banking and financial products and services worldwide.What are the underlying business or industry changes driving this perspective?

The bank is intensifying investment in Asian wealth management and private banking, leveraging a strong brand and local presence in fast-growing wealth markets like Hong Kong, mainland China, and Southeast Asia; this positions HSBC to capture rising affluence and middle class expansion, fueling future growth in fee income and supporting more resilient earnings and higher margins.
HSBC's global network and expertise in facilitating cross-border trade uniquely position it to benefit from the continued expansion of Asian intra-regional and international trade flows and Belt and Road-related capital movement, driving stronger, sustained growth in transaction banking revenues and non-interest fee income.
The strategic shift away from underperforming and non-core businesses in Europe and the Americas, and redeployment of capital into high-return businesses in Asia and the Middle East, is expected to improve overall net interest margins and boost group return on equity through better allocation of resources.
Disproportionate investment in digital transformation, including AI-driven efficiency gains and digital onboarding, will generate structural cost reductions (organizational simplification savings), directly improving the cost-to-income ratio and lifting long-term operating leverage and net margins.
The strong and growing deposit base, especially in Asia, enables HSBC to capitalize on future loan growth opportunities tied to regional economic expansion, enhancing net interest income and providing a stable foundation for earnings growth as financial inclusion and credit penetration increase.

HSBC Holdings Earnings and Revenue Growth

HSBC Holdings Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming HSBC Holdings's revenue will grow by 8.2% annually over the next 3 years.
Analysts assume that profit margins will increase from 31.7% today to 35.5% in 3 years time.
Analysts expect earnings to reach $25.3 billion (and earnings per share of $1.57) by about September 2028, up from $17.8 billion today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $22.4 billion.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 10.9x on those 2028 earnings, down from 12.4x today. This future PE is greater than the current PE for the US Banks industry at 8.5x.
Analysts expect the number of shares outstanding to decline by 3.25% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 11.23%, as per the Simply Wall St company report.

HSBC Holdings Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Prolonged weakness and potential further deterioration in the Hong Kong commercial real estate (CRE) market is driving higher expected credit losses (ECL), which may continue to pressure group-level net margins and increase credit costs if CRE values and office demand do not recover as projected.
Persistent uncertainty and volatility in global interest rates-especially relating to the sensitivity of HSBC's banking net interest income (NII) to HIBOR and U.S. dollar movements-creates material risk to core revenues should normalization of rates be delayed or if deposit repricing benefits fade.
Continued exposure and strategic reliance on growth from Asia, particularly Hong Kong and mainland China, leaves HSBC vulnerable to region-specific macroeconomic slowdowns, heightened regulatory crackdowns, or geopolitical tensions, potentially dampening top-line revenue growth and eroding net margins.
Strong recent growth in fee-based and wealth management income has benefited from favorable market volatility and transactional tailwinds, raising concerns about sustainability and introducing potential downside to revenues and return on equity if market conditions normalize or client activity weakens.
Material ongoing investment in digital transformation, cost restructuring, and technology to maintain competitive parity may compress operating margins and consume capital, risking lower-than-expected shareholder returns if efficiency gains are not fully realized or are offset by rising compliance, cybersecurity, or regulatory costs.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of £9.491 for HSBC Holdings based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of £11.29, and the most bearish reporting a price target of just £7.93.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $71.2 billion, earnings will come to $25.3 billion, and it would be trading on a PE ratio of 10.9x, assuming you use a discount rate of 11.2%.
Given the current share price of £9.55, the analyst price target of £9.49 is 0.6% lower. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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