Reasons to consider buying HSBC shares now

HSBC Holdings (LSE: HSBA) The stock is making headlines, and not just because of the bank’s upbeat third-quarter results released on Tuesday (29 October).

A week earlier, FCS index 100 The banking giant unveiled a new and simplified corporate structure.

Have you ever wondered whether we should think of HSBC as a British bank and try to compare it to banks like Lloyds Banking Group? Or is it an international bank specializing in the Chinese sector? Or an investment bank, perhaps?

I’ve been investing in bank stocks for years and never knew how to answer all of this.

Simplify

HSBC says that from 1 January 2025 there will be “work across four enterprises with clear lines of responsibility“.

These are Hong Kong, UK, Corporate and Institutional Banking, as well as International Banking and Premier Banking.

All business will remain there. But we hope this will make it easier for retail investors to align their positions with the rest of the market.

If this helps me compare International Wealth and Premier Banking HSBC Investment Manager M&Glet’s say it should be good.

Third quarter results

In the third quarter, CEO Georges Elkhedery said:Strong organic capital generation allows us to announce another $4.8 billion in payouts in the third quarter, bringing the total payouts announced so far in 2024 to $18.4 billion.“.

I like to see a company that has so much free cash that it can continue to return it to shareholders that way. This is because HSBC has just completed a previous share buyback. And here we’re looking at a projected dividend yield of 7%.

In addition, HSBC continues to “target average return on equity (“RoTE”) in 2024 and 2025.“. And it is aimed at “Manage the CET1 capital ratio within a medium-term target range of 14% to 14.5%, with a target dividend payout ratio base of 50% for 2024.“.

I like this sound.

Uncertainty

However, what I’m most uncertain about right now is how HSBC’s new structure will evolve in the coming years.

This will not only make certain areas of business more understandable for investors, but will also facilitate the bank’s possible future actions. Could we see a rollback of the UK banking system?

Could this provide closer ties to the Chinese economy, with Hong Kong operations becoming a new business unit at arm’s length? This is all cause for fear, especially as economic ties between the West and China become increasingly strained.

In short, I just don’t know what HSBC will look like in 10 years. And I think I have a much better idea of ​​where Lloyds and Barclays most likely they will.

Grade

This uncertainty may be at the heart of HSBC’s low valuation.

With a projected price-to-earnings (P/E) ratio of just 7.5 for the current year and falling to 7.1 by 2026, the stock does look cheap.

And big dividends are very tempting.

I rate HSBC as a company that long-term income investors should consider buying. But now I’m playing the watch and wait game.