HSBC Holdings plc (LON:HSBA) (LSE:HSBA.L) has released results for FY2016 to the stock market. Although reported PBT dropped 62% to $7112 million when compared to the previous year, HSBC made progress with its strategy in my opinion.
It was able to complete a $2.5 billion share buyback following the successful sale of its investment in Brazil. It reduced risk-weighted assets during 2016 by $143 billion due to extensive management actions, which included the sale of its business in Brazil. HSBC was also able to generate annualised run rate savings of $3.7 billion, following its large investment in costs to achieve of $4 billion.
Following on from the investment in costs to achieve, HSBC expects to deliver increased annualised cost savings of $6 billion, while also investing in regulatory programmes and other compliance measures. It has also been able to increase its market share in key markets, such as trade finance in Hong Kong and Singapore.
Adjusted PBT of $19.3 billion was 1.2% down on the previous year. Its CET1 ratio of 13.6% and leverage ratio of 5.4% indicate a relatively strong capital base in my opinion. As well as positive adjusted jaws of 1.2% and a share buyback programme of up to a further $1 billion, I think investors may be encouraged by some of the progress made by HSBC.
HSBC’s share price has risen 58% in the last year. That’s ahead of other bank shares such as Lloyds Banking Group PLC (LON:LLOY) (LSE:LLOY.L) and Barclays PLC (LON:BARC) (LSE:BARC.L), which are 9% and 47% higher respectively. Shares in Standard Chartered PLC (LON:STAN) (LSE:STAN.L) have gained 84% in the last year.
In my opinion, HSBC has long term investment potential. I feel it is making progress with its costs and this could help to improve profitability in future years. It’s a similar story at Barclays, Lloyds and Standard Chartered, where they are in the process of improving their efficiency which I think will benefit their share prices. Therefore, I’m optimistic about the prospects for all 4 stocks, but feel HSBC’s exposure to a fast-growing Asian economy and progress with cost reductions could make it stand out as a relatively strong investment.