Quite a few FTSE 100 shares look probably low-cost to me.

Take HSBC (LSE: HSBA) for example. It has soared 207% from a 2020 low. Nevertheless it nonetheless trades on a price-to-earnings ratio of simply 9 – and presents a 5.5% dividend yield in addition.

May or not it’s the largest discount on the blue-chip index proper now?

The financial institution has been reshaping itself in recent times, exiting sure markets. It continues to be a sizeable drive in key markets, notably Hong Kong and the UK.

Having already offered off varied companies, HSBC continues to reshape itself round a few centres of gravity, in Asia and the UK. That provides geopolitical danger.

On the plus aspect, it presents the good thing about diversification and permits the skilled, longstanding financial institution to profit from financial progress alternatives in a single area even when the opposite is performing much less strongly.

HSBC will not be essentially the most thrilling enterprise, however as an investor I like its sturdy model, confirmed enterprise mannequin, massive buyer base and important ongoing money technology potential. That final level may help assist the dividend.

A 5.5% yield is already properly above the FTSE 100 common, however some HSBC shareholders are doing higher. In any case, those that purchased again on the 2020 low I discussed would now be incomes a dividend yield near 17%.

The share price could possibly be good worth, however carries dangers

Whereas that P/E ratio might look low, it’s just about par for the course amongst London-listed banks. It’s decrease than the 11 of Barclays however in keeping with each Lloyds and Natwest.

That factors to a priority I believe some buyers (together with myself) have concerning the sector. Whereas earnings have been sturdy up to now a number of years, a weak and unsure international economic system may imply greater mortgage defaults in coming years.

If that occurs, I might count on banks together with HSBC to take successful to their earnings.

If the worldwide economic system steps up a gear then banks might come to look undervalued at right now’s costs. That might imply the next share price for HSBC a number of years from now.

Nevertheless, the chance setting doesn’t make me really feel comfy investing in banks in the meanwhile.

I doubt that is the FTSE 100’s  greatest discount share

So, I cannot be investing in HSBC.

Its yield is enticing, however it’s properly under that at present supplied by different FTSE 100 shares I personal equivalent to M&G and Authorized & Normal.

As for valuation, it seems to be pretty low-cost however no more so than some rivals. As as to if that look of cheapness is in reality appropriate, time will inform.

If banks like HSBC encounter choppier waters, their present valuations is probably not low-cost regardless of buying and selling on a single digit P/E ratio. I want extra margin of security.