HSBC Holdings P L C (HSBC)

About a year ago there was the BREXIT noise. If you had sold this then, you would be looking kind of foolish. In the last 12 months, it is up about 56%. Also, 50% of its money is effectively booked in Hong Kong for the Asian businesses and linked to the US interest rate PEG. If the US raises interest rates, that will be good for them. There have been some issues with regards to BREXIT, but the company is looking to manage that issue and are moving bankers to continental Europe. A global bank that played out pretty well during the global crisis.

A very strong franchise. It is much more global than the Canadian banks. Overall, the valuation is attractive and the yield is pretty good. Financials have been under pressure lately, but ultimately we are lining up for a series of events including higher interest rates, more clarity on capital requirements, and a rolling back of Dodd Franks in the US.

Global banking end markets have had a good quarter. They did well in the UK and Hong Kong this year, which has their stock price starting to come back a little. Many of these stocks were down after BREXIT, so coming off a low is going to look really good for performance numbers. They’ve been restructuring and starting to get to a point where they are becoming less risky from a Long standpoint, and are taking on more wealth management income products. That is going to bode well for them.

This has a great Asian franchise, but if you want to own a global bank, he would prefer J.P. Morgan (JPM-N) or Bank of America (BAC-N), which he feels are much more suited to those areas. If you wanted something more retail oriented, he would own Lloyds (LLOY-LN). They have been restructured as much is they should, and that has really hurt them. (See Top Picks.)

There is not that much to get excited about. They are doing well in China. They have a good dividend yield (6.4%).

(Market Call Minute.) This is still downsizing, selling off a lot of assets to get their margins back on board, so he wouldn’t be a buyer.

Since May, this company has virtually gone hyperbolic. More recently, expectations of higher rates have driven rates very high. This is an interesting story here.

HSBC Holdings (HSBC-N) or ING Groep (ING-N)? Two very different companies. This one is a global bank. They are both cheap, but the issue becomes if we get out of this global slump, is where does the growth come from. This one has a much broader business. If he had to pick one, he would choose ING, because being a good, strong retail bank is a very good business if it is done well.

European banks are in a big massive restructuring cost cutting, and this one is no different. There has been a lot of drop in business overseas in Asia, which is where this bank is doing a lot of their business.

They cleaned up their problem areas. They are an excellent global bank and he is looking at it. They have great franchises in Asia. They are well diversified.

Has had so many headwinds that it has been very difficult for them. Have fairly high costs, so their efficiency ratio is not great. It does provide a fairly decent yield of around 5.5%. If you hold this, you have to have a very long time horizon. You need China to be healthy for this stock to work.

Through the financial crisis it cut its dividend, but was actually able to raise money from the private sector. Over the longer-term, it has been an awful performer. He is back to where he was 15-16 years ago. The difficulty is their exposure to emerging markets. The major difficulty is that it is still headquartered in the UK and has decided to remain there. Banking in developed markets, with the possible exception of Canada, is not really a very attractive business longer-term, because if you do make any money either the staff gets it or the government will tax it. He would Sell.

The banks would have liked to see a rate rise. It is one of the poorer looking bank stocks. There is nothing in the chart to say go buy it. It’s not terrible to invest here and collect the dividend, but he sees no catalyst or driver for the stock.

Has had a myriad of problems going back to 2007. Was beset with regulatory, legal and earning problems. When you see a bank paying 7.5%, you immediately have to question if that is a sustainable dividend. Very difficult to analyse because its holdings are worldwide and is dealing in multiple currencies.

A massive global bank. The dividend is secure. It is suffering in part because of the emerging markets, notably Asia. That is not going to go away anytime soon. This is a survivor.