Ian Forrest, investment research analyst at The Share Centre, outlines why HSBC is his share of the week:
The largest of the UK’s banks, HSBC, is our share of the week this week as the share price has fallen around 5% over the past two weeks which may make the stock an attractive entry opportunity for investors.
In July, the group released its interim results which exceeded expectations with an increase in net profit to $7bn. Interested investors should appreciate that there was a confident tone to management comments, as they highlighted revenue growth in all three of the firm’s global businesses. Furthermore, the group is seeing that a combination of stronger trading conditions, lower loan impairments and rising interest rates in the US have helped performance.
HSBC has a mix of business and geographical spread, and is keen to promote the Asian franchise which it hopes, in the long run, will see the group emerge from a difficult period for the sector.
Income-seekers in the banking sector have been hit hard in recent years but HSBC’s yield of 5.3% is attractive and the capital level is relatively strong among its peers. Encouragingly, the group has remained a significant payer and now there are clear indications that the group is starting to benefit from its restructuring programme, the shares could be a better option than other banks. We therefore continue to suggest the shares as a ‘Buy’ for those willing to accept a medium level of risk and seeking an income.