HSBC stock jumps on revenue growth and buyback: Is there more Upside?

HSBC share price wavered today after the company published strong financial results, mirroring the performance of other European banks. It was trading at 1,575p on August 4, a few points below this week’s high of 1,608p. It has jumped by 31% this year, outperforming the FTSE 100 Index and the Invesco KBW Bank ETF (KBWB). 

HSBC released strong numbers

HSBC, the biggest European bank, published strong financial results, helped by the relatively higher interest rates and corporate actions. Its pre-tax profit jumped by 60% in the second quarter to $10.1 billion, while its revenue jumped to $19.1 billion. In a statement, Georges Elhedery, the CEO, said:

“HSBC is becoming the stronger bank we set out to build. We are executing our strategic priorities with pace, precision and discipline. This is allowing our four businesses to focus on their core strengths, grow, work together more effectively and deepen customer relationships. The result is a bank capable of achieving more.”

These results showed that its net interest margin jumped to 1.61%, helped by foreign exchange translation. At the same time, the management continued to manage its expenses, with its operating ones rising by just 2%.

Customer lending jumped by $34 billion, while its common equity tier 1 (CET1) came in at 14.1%, a 0,8% drop from where it was in December. As a result, the management announced a dividend of $0.10 per share and initiated a share buyback of up to $1 billion. This is the first buyback since its acquisition of Hang Seng last year.

READ MORE: HSBC stock outlook: can it hold gains despite Q1 profit miss?

HSBC’s business has been doing well in the past few years, which has helped it become the biggest company in the FTSE 100 Index by market capitalization. It has exited some major markets like Canada, France, Argentina, New Zealand, and South Africa.

At the same time, the management has announced a large cost-cutting operation, including by layoffs and merging some divisions. 

Most notably, the company has announced its emphasis on the Chinese market, where it is seeking to compete with companies like UBS and Standard Chartered in the wealth management industry. Its appeal in this is that it is one of the biggest companies in cross-border wealth transfer. As a result, its total assets in the wealth business jumped to over $1 trillion in the last quarter, with the net new money rising by 32%.

HSBC share price technical analysis

HSBC stock chart | Source: TradingView

The weekly chart shows that the HSBC stock has been in a strong bull run this year. It has remained above the 50 Exponential Moving Average (EMA), which is at 1,258p. Looking back, the stock has remained above this average constantly since April last year.

The Relative Strength Index (RSI) has continued rising and has just crossed the overbought level. It remains above the Ichimoku cloud, while the Average Directional Index (ADX) has risen, a sign that the uptrend is gaining trend.

Therefore, the stock will likely continue rising, potentially to the psychological level of 1,700p. However, there is also a risk that the stock will pull back as investors start to book profits.