I’ve had an eye fixed on HSBC (LSE: HSBA) shares all 12 months, questioning if I ought to add the FTSE 100 financial institution to my portfolio.

The HSBC share price is up a modest 10.65% over the previous 12 months. Nevertheless, over three years it’s up a thumping 56.74%.

But regardless of that, the Asia-focused financial institution has a lowly price-to-earnings ratio (P/E) of simply 7.69. That’s roughly half the FTSE 100 common of 15.4 occasions. 

Can this FTSE 100 financial institution maintain climbing?

Though it’s not such an outlier once I examine it to different FTSE 100 banks. Lloyds Banking Group has a P/E of 8.16 occasions whereas NatWest Group has a P/E of seven.29 occasions. That’s regardless of sturdy share price development over the past 12 months. It’s a sector factor.

The place HSBC actually scores is the dividend earnings. The shares presently have a trailing yield of seven.16%. That compares to 4.48% for Lloyds and 4.77% for NatWest. The forecast yield is a staggering 9.1%.

HSBC’s board has additionally been lavishing buyers with share buybacks. They totalled £7bn throughout the 2023 monetary 12 months, and the cash retains coming. Departing CEO Noel Quinn handed shareholders $36bn in dividends and $18bn in buybacks in somewhat over 4 years.

I’d like to have shared in that, however rising tensions between China and the West have held me again. I felt that in some unspecified time in the future, HSBC must select between the 2. And now it has.

Attempting to maintain either side of the East/West divide glad was at risk of tearing the banking aside and new CEO Georges Elhedery has performed simply that. On Tuesday, we realized that he’s splitting the group into Japanese and Western markets.

Away from Western eyes

That’s hardly stunning. Final 12 months, The All-Get together Parliamentary Group on Hong Kong accused the financial institution of “doing the dirty work of the Chinese Communist Party”, by freezing the accounts of pro-democracy activists. HSBC defended itself by saying that it has to obey native legal guidelines, wherever it operates.

In 2023, HSBC made earnings of $8.3bn within the UK. These had been overshadowed by the $16bn-plus it constructed from China and Hong Kong. The board has made its selection and principally, it’s simply not that into us.

China is the place the motion lies and however though it is a large market, it’s not a surefire winner, as we’ve seen currently. But Elhedery can also be creating a brand new wealth division with designs on the Center East, giving it an enormous alternative within the excessive internet value market. This may very well be an thrilling new alternative for the financial institution and shareholders.

HSBC shares look nice worth given the outsize long-term alternative, tidier set up and decreased political threat. I feel it’s time to cease over-thinking this and add HSBC to my portfolio.