HSBC share price yields 7% and has numerous catalysts ahead

The HSBC (LON: HSBA) share price has remained in a tight range as investors wait for more turnaround efforts by the new Chief Executive and the ongoing earnings season. The stock was trading at 675p on Tuesday, down by over 5.7% from the year-to-date high.

HSBC turnaround continues

The main catalyst for the HSBC share price this week is the ongoing turnaround efforts by Michael Elhedery, the recently appointed CEO. 

In a statement, the company said that it would combine its global commercial and institutional banking operations. 

It will also create a new International Wealth and Premier Banking business as it seeks to become a big contender in an industry dominated by UBS. 

As part of the new development, the company will have an Eastern regional unit and a Western market. Also, it has decided to make Hong Kong and UK standalone businesses, a move that will help to simplify the company. In a note, a Morninstar analyst said:

“This reorganization to simplify the business, and separate Hong Kong and the UK into their own businesses, should be positive. It may also help answer the concerns of shareholders in Asia, who argued a few years ago that such a separation could improve returns.”

The new approach will also have some job cuts, including reducing the number of workers on key operating committees from 18 to 12. Also, it appointed Pam Kaur as the new Chief Financial Officer (CFO). 

It is still unclear whether combining the commercial and institutional businesses will be received well inside the bank. For a long time, staff, including Noel Quinn, the former CEO opposed the measure.

Read more: HSBC share price is up 200% from 2020 lows; more upside?

HSBC has been on a cost-cutting measure

The new strategy came as the company continued to implement its turnaround strategy as Elhedery aims to save about $2 billion in the next few years. 

As part of these cost cuts, the management has canceled some internal events and travel expenses. For example, it scrapped a summit for bankers in India, while managers have had their planned trips canceled. 

Additionally, the company is rumored to be considering Citigroup-style layoffs either in 2024 or in 2024. Earlier this year, Citi announced a plan to slash over 7,000 jobs as its turnaround efforts continue. HSBC also slashed thousands of jobs since 2020.

These actions are part of making HSBC a leaner high-growth bank. As part of this strategy, HSBC has exited some key markets like the United States, Spain, France, Canada, and Argentina. 

Its most recent exit was its decision to sell its South African business to FirstRand and Absa. It also exited its Argentinian business as the country continues to go through an economic crisis. 

HSBC hopes that exiting these markets will help it increase its focus on the Asian market, which it sees as its future. In particular, the company is focusing on the Chinese market, which has generated over 6.2 million millionaires in the past few years. 

Bank earnings continue

HSBC share price has also moved sideways as investors focus on the ongoing bank earnings like JPMorgan, Goldman Sachs, and Morgan Stanley.

JPMorgan and Wells Fargo said that their profits dropped in the third quarter as interest rates started to fall. Goldman Sachs and Morgan Stanley, on the other hand, had stronger quarters, helped by their trading operations. 

HSBC will publish its financial results on October 29. The most recent financial results shows that its revenue rose by 1% in the first half of the year to $37.3 billion, while the profit before tax remained at $21.6 billion. 

The company also continued returning funds to investors. It completed its $5 billion buyback in the first half of the year, bringing the buybacks to $12 billion since 2022. 

HSBC also announced a new program of $4.8 billion in buybacks and dividends. This makes it one of the most rewarding banks in the industry. It also has room to grow its payouts since it has a CET1 ratio of 15.2%, while other companies have a ratio of 13%. 

HSBC has a dividend yield of almost 7%, making it an ideal company for income-focused investors, especially as it continues its turnaround strategy.

HSBC share price analysis

HSBA chart by TradingView

The daily chart shows that the HSBA stock price has moved sideways in the past few weeks. It has remained above the 50-day and 100-day Exponential Moving Averages (EMA).

The stock has also moved above the ascending trendline that connects the lowest swings since February last year. 

Most notably, there are signs that it has formed an inverse head and shoulders chart pattern. Therefore, a bullish breakout cannot be ruled out. If it happens, the next point to watch will be at 716p, its highest point this year, which is about 6.37% from the current level. More gains will be confirmed if it moves above that level.

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