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HSBC Holdings Net Income dropped on 81.7% in 2016 and Revenue dropped on 18.4%

21 Feb 2017 • About HSBC Holdings ($HSBA) • By InTwits

HSBC Holdings reported 2016 financial results today. Overall the company's long term financial model is characterised by the following facts:
  • HSBC Holdings is a company in decline: 2016 revenue growth was -18.4%, 5 years revenue CAGR was -8.5%
  • HSBC Holdings has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.8%. At the same time it's a lot of higher than industry average of 19.8%.
  • CAPEX is quite volatile: 3,048 in 2016, 5,372 in 2015, 8,815 in 2014, 9,559 in 2013, 2,970 in 2012
  • The company has potentially unprofitable business model: ROIC is at 0.8%
  • It operates with high leverage: Net Debt/EBITDA is 4.0x while industry average is
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.

HSBC Holdings ($HSBA) key annual financial indicators

mln. $201220132014201520162016/2015
Net Income14,02716,20413,68813,5222,479-81.7%
Balance Sheet
Short Term Debt411,992336,237267,998195,985213,6309.0%
Long Term Debt148,940133,056122,611111,65186,899-22.2%
Cash flow
Revenue growth-8.0%-8.0%-3.3%-4.1%-18.4%
Net Income Margin15.4%19.3%16.9%17.4%3.9%-13.5%
CAPEX, % of revenue1.4%2.3%1.8%1.7%1.8%0.1%

Revenue and profitability

HSBC Holdings's Revenue dropped on 18.4% in 2016.

Net Income marign dropped on 13.5 pp from 17.4% to 3.9% in 2016.

Capital expenditures (CAPEX) and working capital investments

HSBC Holdings's CAPEX/Revenue was 1.8% in 2016. HSBC Holdings's CAPEX/Revenue decreased slightly on 0.51 pp from 2.3% in 2013 to 1.8% in 2016. It's average CAPEX/Revenue for the last three years was 1.8%.

Return on investment

The company operates at low ROIC (0.82%) and ROE (0.71%). ROIC decreased slightly on 1.7 pp from 2.5% to 0.82% in 2016. ROE decreased on 5.9 pp from 6.6% to 0.71% in 2016.

Leverage (Debt)

Debt decreased on 2.3% in 2016 while cash jumped on 27.0% in 2016.

Management team

The company's CEO Stuart Gulliver is a founder and has spent 7 years at the company. The company's CFO is Iain James Mackay. Iain James Mackay has 7 years tenure at the company.

Appendix 1: Peers in Banks

Below you can find HSBC Holdings benchmarking vs. other companies in Banks industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.

Top companies by Revenue growth, %

Top 5 FY2012 FY2013 FY2014 FY2015 FY2016
Kazkommertsbank JSC ($KKB)6.0%16.3%41.4%
Sberbank Of Russia ($SBER)37.2%25.1%23.4%27.4%
Commercial Intl Bank(Egypt)S.A.E ($CBKD)23.7%18.9%26.8%27.0%
Yapi Ve Kredi Bankasi As ($YKBD)4.8%19.7%25.3%17.8%
Mcb Bank Ltd ($MCBS)-1.7%19.4%22.4%-10.7%
Median (43 companies)21.7%4.8%12.1%5.5%4.2%
HSBC Holdings ($HSBA)-8.0%-3.3%-4.1%-18.4%

Top companies by CAPEX/Revenue, %

Top 5 FY2012 FY2013 FY2014 FY2015 FY2016
Banque Marocaine Du Comm Exterieur ($69IR)3.7%9.7%4.3%26.8%
Lloyds Banking Group ($LLPC)8.0%8.9%13.1%13.6%14.5%
Banco Santander Sa ($BNC)2.7%2.6%8.9%10.2%9.1%
Guaranty Trust Bank ($GRTB)6.7%6.1%6.8%7.7%
Diamond Bank ($DBPA)8.2%7.9%6.0%6.7%
Median (41 companies)2.4%2.8%2.2%2.5%1.9%
HSBC Holdings ($HSBA)1.4%2.3%1.8%1.7%1.8%

Top companies by ROIC, %

Top 5 FY2012 FY2013 FY2014 FY2015 FY2016
Commercial Intl Bank(Egypt)S.A.E ($CBKD)21.7%26.9%30.1%30.3%28.5%
Guaranty Trust Bank ($GRTB)19.8%18.9%17.8%16.0%
Mcb Bank Ltd ($MCBS)15.0%14.4%15.8%14.9%12.5%
United Bank Ltd ($UBLS)11.7%11.8%13.8%12.6%10.7%
Zenith Bank ($ZENB)19.0%17.6%15.0%11.2%
Median (43 companies)6.4%5.7%4.5%3.5%4.6%
HSBC Holdings ($HSBA)2.3%2.8%2.4%2.5%0.8%