HSBC Holdings P L C (HSBC)

HSBC-Q vs. AMTD-Q. The TD business is a better long term holding than HSBC. They have been benefiting from the globalization of China but have not been investing long term in their regional offices. TD has a growth opportunity with independent advisors. It is a better long term risk reward.

Thinks it has a discount from BREXIT on it, but is very exposed to Asia, which is a real growth driver. Its key market is based in Hong Kong, which is pegged to the US$, giving US leverage on the interest rate rise. It has a China credit card business, which is new, because China is a closed credit card market. Has a very attractive dividend. It will benefit from rising interest rates as Net Interest Margin, a critical driver of buying profitability, will need to rise by 70% to reach pre- crisis levels. (Analysts’ price target is $41.22.)

A huge global bank. Have had some difficulties with world authorities about money laundering, and were implicated on a big scale. He was told that they have cleaned up their act, but as an outsider, it is impossible to know. One of the most widely held non-North American banks you can buy.

Between March 30 and August 10 is the optimal time to be buying and holding this. It has had an average return of about 7.7% over the benchmark, and has been positive in 14 of the past 17 years. This year it had a low of about $39 in April all the way to a high of about $50 just before August, a phenomenal run. We are beyond its period of seasonal strength, but there are still higher highs and higher lows technically. This is not something he would venture into, but would go into other financial companies instead.

If looking at European banks, Banco Santander (SAN-N) or HSBC Holdings (HSBC-N) are two that he would consider.

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.