MIDAS SHARE TIPS: £116bn giant HSBC can help boost YOUR bank account

A few weeks ago, on holiday with friends, the weather was warm, the food fantastic and the wine plentiful. For one of our party, however, the biggest excitement came from her new bank card. She had recently opened an account with Monzo and was delighted with all the services it offered abroad. She even told her how much she spent on trips to bars and markets.

My friend is not alone. Millions of people are signing up with so-called “challenger” banks, tech-savvy, online-only companies that offer new accounts in minutes and a host of user-friendly gimmicks designed to keep customers interested.

Challengers are a welcome addition to an industry that has been stuck for decades. But most newbies make little or no money, partly because they are constantly investing in improved technology. And also because most Britons still rely on mainstream banks and building societies.

Complaining about these institutions may be a national pastime, but few of us are inclined to move our entire accounts to internet companies. Business customers are even more traditional, turning to old-fashioned clearinghouses for all their banking needs.

This innate conservatism is an ongoing challenge for the newcomers, but it does mean that the big lenders retain a dominant position in the banking sector, HSBC being the biggest of them all.

HSBC is valued at £116 billion on the stock exchange and is Britain’s fourth-largest company, with 40 million customers across 60 countries.

Last year the bank generated revenue of $66 billion (£52 billion) and profits doubled to $30.3 billion as lending increased, costs fell and higher interest rates boosted profit margins.

In other words, the bank could make more money on the difference between the amount it charged its customers to borrow money and the amount it offered them in a savings account.

A source of constant frustration for customers, that revenue stream is likely to decline as interest rates fall. But HSBC is still expected to deliver steady growth this year and beyond, with profits approaching $32 billion by 2026.

Yet HSBC shares have fallen sharply in recent years, reaching £7.50 in 2017, plummeting during the pandemic and never fully recovering since.

They currently stand at £6.45 and are expected to rise as the bank targets faster growing markets and seeks to reward customers and shareholders.

On the investor front, HSBC is one of the most generous dividend payers on the stock market. Outgoing CEO Noel Quinn announced a special dividend of 21 cents (16.5p) earlier this year after selling a Canadian subsidiary for almost £4bn. Even excluding that one-off payment, brokers expect total payments of 63 cents (49.6p) this year, rising to 67.8 cents (53.3p) in 2025 and almost 72 cents (57p) the year after that.

This means that HSBC shares offer a yield of over 7.5 percent, which is particularly attractive in the current climate. The bank itself offers a maximum savings interest rate of 4.6 percent.

Quinn steps down next month and will be succeeded by Georges Elhedery, currently the group’s chief financial officer. Quinn, an HSBC lifer, spent five years at the helm and has been praised for simplifying the business and cutting costs.

Elhedery is expected to continue in that vein, using his financial skills to balance investments with tight control over spending. The group has certainly benefited from Quinn’s stewardship, but there have been challenges.

HSBC makes most of its money in Asia, particularly China, where it has the largest network of any foreign bank. Premier Xi Jinping has struggled to regain the country’s economic mojo and the outlook remains uncertain.

HSBC also needs to tread a diplomatic line in China and Hong Kong. Looking ahead, however, business is expected to pick up, particularly as the bank turns its attention to wealth management, helping new generations of middle-class Asian consumers invest and save. The group also has a wealth of experience in the region, with a presence in Hong Kong and Shanghai since 1865.

Midas Pronouncement: HSBC is one of the world’s largest banks, with decades of experience in every area of ​​the market. Its global reach brings many advantages, including exposure to faster-growing emerging market economies and the ability to work with multinationals around the world. At £6.45, the bank’s shares offer a tempting yield and long-term growth prospects. Buy and hold.

Traded on: Main Market Ticker symbol: HSBA Contact: hsbc.com