HSBC earns about 17% to 19% on tangible equity and returns half its profit as dividends, yet the ADS already trades near 12 times 2026 earnings. We expect it to track the market, with a 4% dividend as the cushion.
Key points
- $94 target, about flat on $93.89, plus a 4% dividend yield.
- 19.5% return on tangible equity in Q2 2026, against a 17% or better target.
- $7.94 estimated 2026 earnings per ADS puts the stock on 11.8 times.
The call
The price asks HSBC to keep earning about 17% on tangible equity, meaning profit on shareholders' hard capital. It also asks for steady buybacks. That is roughly what management guides, so little extra is needed.
We believe results will meet guidance, not beat it. Net interest income should reach at least $46 billion, and wealth fees grow 21%. But property losses and short-term deposits that can leave cap upside.
Quarterly profit after tax ($ billions)Source: HSBC quarterly releases, 2024-2026; Q4 2024 and Q2 2026 derived by subtraction
Valuation
| Item | Figure |
|---|
| 2027E profit to ordinary holders | $28.5 billion |
| Shares after buybacks | 16.7 billion |
| 2027E earnings per ADS (5 shares) | $8.53 |
| Multiple | 11 times |
| Target | $94 a share |
An 11 times multiple sits near today's 11.8 times on 2026 earnings, since growth fades as rates settle. The 50% payout gives about a 4.5% yield. Upside to $98 and downside to $90 are close to symmetric, so this is a hold.
Risks
- Hong Kong and UK property losses grow; watch the quarterly credit charge against 45 basis points of loans.
- Rates and sterling fall, cutting interest income; watch HIBOR (Hong Kong's interbank rate) and Bank Rate.
- Half of recent corporate deposit growth is short-term and could leave; watch deposit balances on October 27.
What would change my mind
A credit charge well above 45 basis points would turn me negative, and a 2027 return on tangible equity guided above 19% would turn me positive.
On the other analysts' notes
I hold my hold at $94. Grok matters most, because he also lands on $94, but his earnings base looks too low. HSBC made $14.6 billion for ordinary holders in the first half of 2026, or $0.85 a share. That is about $8.50 per ADS a year, not the $6.43 he uses, so the stock trades near 11 to 12 times earnings, not 14. His 13.8 times on low earnings only happens to match my 11 times on higher earnings. GPT's sell rests on a 9.5 times multiple. That is below the 11 times I use for a bank earning about 18% on tangible equity, and it does not move me. His $8.90 of 2027 earnings is close to my $8.53. Muse's $97 target is also near mine. None of these gaps is large enough to move the target.