THE BHOPAL SCHOOL OF
SOCIAL SCIENCES
CCE – 1
COURSE – FINANCIAL MANAGEMENT
DOMAIN AREA: FINANCIAL
PERFORMANCE ANALYSIS AND
STRATEGIC FINANCIAL PLANNING
TOPIC: PERFORMANCE ANALYSIS OF
HSBC
SUBMITTED TO SUBMITTED BY
DR. SMITHA PILLAI BHUMIKA BISHT
HISTORY
HSBC was born from one simple idea a local bank serving international needs.
In march 1865 HSBC opened its doors for business in Hong Kong helping to
finance trade between Europe and Asua
HSBC From its founding member. The Hong Kong and Shanghai Banking
Corporation is a British universal and financial service group headquarter in
London England with historical and business links to east Asia and
multinational footprint
Founded and established on 3 March 1865 First incorporated on 14 August 1866
Founder: Sir Thomas Sutherland
Headquarter: 8 Canada square London England Uk
HSBC has offices branches and subsidiaries in 62 countries and territories
across Africa, Asia oceanic Europe, north America and south America serving
39 million customers.
After the British establishment Hong Kong as a crown colony in aftermath of
the first opium war merchant from other part of the British empire now is Hong
Kong felt the need for a bank to finance the growing trade through Hong Kong
and sometime also through Shanghai between China and India.
Sir Thomas Jackson became chief manager in 1876. Michael turner became
chief manager [Link] set diversifying the business. Tenure end 1962 having
established the Hong Kong and Shanghai banking Cooperation of California
1955 and having acquired the British bank of the middle east and mercantile
bank in august 1959. Turnover was succeeded in 1962 by Jack sounder
The new headquarter of Hsbc holding at 8 Canada square
1. July 2003 – Korean fund acquires 82.19%
2. June 2004 – HSBC expanded into China 19.9%
3. August 2005 – Us credit card issue for $1.6 billions
4. April – 2006 Hsbc brought 90 branches in Argentina $ 155 billions
5. December 2007 – Hsbc acquires the Chinese in Taiwan
6. May 2008 – Hsbc acquired JL&FS investment
7. March 2009 – Hsbc announced shut down branch in US
8. APRIL 2011 – Shut down in retails banking in Russia
9. May 2013- New chief executive Stuart Gulliver
10.2010 – Stephen green plan to depart Hsbc
[Link] 2012 – agreed to pay a record $1.92 billion
[Link] 2014 – an indirect wholly owned subsidiary
[Link] 2015 – international consortium of investigative journalist
14.2016 – numerous times in connection with Panama paper and
investigation
[Link] 2017 – the guardian reported that hundreds of banks helped
launder kg.
[Link] 2018 – Stuart Gulliver as group chief executive
[Link] 2019 – flint was leaving and his role would be filled on temporary
basis
[Link] 2020 - Noel win was subsequently appointed
[Link] 2021- Hsbc opened 82 branches closing in Britain
[Link] 2022- Hsbc announced its intention to sell it business in Russia
[Link] 2023 – Hsbc announced that it profits for the last quarter of
2022
22.2024- The Hongkong association of banks began developing a roadmap
to phase out checks in the city. announce the international payment app
SWOT ANALYSIS
THE SWOT ANALYSIS OF HSBC IS PRESENTED BELOW:
STRENGTH WEAKNESS
1) Geographical and business 1. lack of good customer
line diversification. experience
2) Strong capitalization levels
3) Good dividend record
4) Consistently sound
financials over the years
OPPORTUNITIES THREATS
1) Opening of China’s 1. Increasing financial crimes
domestic capital market 2. Heightened levels of risk in
2) Growth prospects in asia the Asia Pacific Region
3) Benefits from transition in
senior leadership
STRENGTH
1. Global Presence: HSBC has a significant international footprint, with
operations in 64 countries and territories across Europe, Asia, the Middle
East and Africa, North America, and Latin America, which provides a
diversified market presence and reduces dependency on any single
market.
2. Brand Value: HSBC is a well-recognized brand with a long history and
strong reputation in the banking industry, which fosters trust among
consumers and businesses alike.
3. Diverse Product Portfolio: The bank offers a wide range of services,
including retail banking, commercial banking, investment banking, and
wealth management, which caters to a broad spectrum of customers.
4. Capital Strength: HSBC typically maintains a strong capital and
liquidity position, which enables it to manage risks effectively and to
meet regulatory capital requirements.
5. Strategic Alliances: The bank has numerous strategic alliances and joint
ventures with local and international firms, which extend its market reach
and service capabilities.
6. Investment in Technology: HSBC has invested significantly in digital
banking and technology to improve customer service and operational
efficiency, making it competitive in a technology-driven market.
7. Extensive Customer Base: The bank serves millions of customers
worldwide, including individuals, businesses, and governments,
providing a stable customer base and significant cross-selling
opportunities.
Weaknesses
1. Complexity and Size: HSBC’s vast size and complexity can make it
challenging to manage and govern its global operations effectively. It also
makes the bank more susceptible to systemic risks.
2. Regulatory Issues: Due to its global presence, HSBC must contend with
a myriad of regulatory environments, which can lead to increased costs
and risks. Past regulatory breaches have also resulted in heavy fines and
damaged its reputation.
3. Brexit Concerns: As a bank headquartered in the UK, HSBC has faced
uncertainties and potential financial impact due to Brexit, which could
affect its market position in Europe and the UK.
4. Cost Efficiency Issues: Maintaining cost efficiency is a challenge for
HSBC, as it must invest in digital transformation while also managing the
high costs associated with its extensive physical branch network.
5. US Performance: HSBC has historically faced difficulties in maximizing
the profitability of its US operations, leading to strategic reevaluations
and restructuring.
6. Market Exit Operations: The process of exiting non-core markets can
be complex and costly, and HSBC’s strategic pivots have sometimes led
to such actions, which can be disruptive.
7. Low-Interest Rate Environment: A prolonged low-interest rate
environment, especially noticeable after global economic challenges, can
compress the bank’s margins and profitability.
Opportunities
1. Growing Emerging Markets: HSBC could capitalize on its strong
presence in faster-growing economies, particularly in Asia, to drive
growth as these regions expand economically.
2. Digital Banking Services: There is a significant opportunity to expand
digital offerings, reduce costs, and attract a new customer base that
prefers online banking over traditional branch banking.
3. Fintech Innovations: Partnering with or investing in fintech companies
could improve HSBC’s service offerings, streamline operations, and
enhance customer experiences.
4. Sustainable Finance: With an increasing focus on sustainability, HSBC
can lead in green finance by offering more eco-friendly products and
investing in sustainable projects.
5. Wealth Management and Private Banking: Capitalizing on the
growing wealth in Asia and other emerging markets presents an
opportunity for expanding wealth management and private banking
services.
6. Cost Rationalization: Through strategic cost-cutting and restructuring
initiatives, HSBC can improve profitability by streamlining operations
and focusing on high-growth areas.
7. Cross-border Financial Services: Leveraging its international network,
HSBC is well-positioned to offer enhanced cross-border banking services
to multinational corporations and businesses.
8. Regulatory Compliance as a Strength: By continuing to build robust
compliance systems, HSBC can turn past regulatory challenges into a
competitive strength, winning trust with clients and stakeholders.
9. Expansion of Payment Services: The bank could further develop its
payment systems and services to compete with emerging payment
platforms and capitalize on the shift toward cashless transactions.
[Link] Experience Improvement: Improving customer service can
help retain existing customers and attract new ones, increasing market
share.
[Link] and Strategic Alliances: HSBC could pursue acquisitions
or form alliances that strengthen its market position or fill gaps in
expertise or geographic coverage.
[Link] of Services: The bank can diversify its service offerings
to cater to niche markets or to offer integrated solutions that meet more of
its customers’ financial needs.
Threats
1. Regulatory Risks: The banking industry is heavily regulated, and
changes in laws, policies, or regulations can have significant compliance
costs or restrict business activities.
2. Economic Fluctuations: Global economic instability, such as the
uncertainty caused by geopolitical tensions, trade wars, or pandemics, can
lead to market volatility, affecting the bank’s profitability.
3. Competition: Intense competition from traditional banks and non-
traditional financial services providers, like fintech startups, can erode
HSBC’s market share.
4. Interest Rate Risks: Changes in interest rates can affect HSBC’s
margins, as the bank might find it challenging to adjust the interest rates it
charges on loans as quickly as the rates it pays on deposits.
5. Foreign Exchange Risk: Given HSBC’s significant international
operations, the bank is exposed to foreign exchange risk, where
fluctuations in currency values can impact earnings.
6. Technological Disruptions: Rapid technological change can render
existing banking methods obsolete and require continuous investment to
keep up with tech-driven competitors.
7. Cybersecurity Threats: The risk of cyberattacks is a constant concern,
with potential financial and reputational damage from data breaches or
service disruptions.
8. Non-Performing Assets: There is always a threat of an increase in non-
performing assets, especially in economic downturns, which can affect
the bank’s balance sheets.
9. Compliance and Legal Challenges: Ongoing and future litigation or
findings of non-compliance with laws and regulations can lead to
significant financial penalties and harm HSBC’s reputation.
[Link]: For HSBC, Brexit continues to present a range of uncertainties,
especially around market access and the regulatory regime governing its
operations.
[Link] Customer Behavior: Customers’ expectations rapidly evolve,
especially with the younger generation seeking more digital and mobile-
friendly banking solutions.
INCOME STATEMENT
BALANCE SHEET
CASH FLOW STATEMENT
RATIOS
ACCOUNTING RATIOS
Accounting ratios also referred to as financial ratios, are applied to
compute the performance and profitability of a firm grounded on its
financial statements. They furnish a way of stating the association
between one accounting data point to another and are the source of ratio
analysis.
1. Liquidity Ratio
2. Profitability Ratio
3. Leverage Ratio
4. Activity Ratio
5. Coverage Ratios or Solvency Ratios
Liquidity Ratios Liquidity ratios are calculated to measure the short-term
solvency of the business, i.e. the firm’s ability to meet its current obligations.
These are analysed by looking at the amounts of current assets and current
liabilities in the balance sheet. The two ratios included in this category are
current ratio and liquidity ratio
Current Ratio Current ratio is the proportion of current assets to current
liabilities. It is expressed as follows:
Current Ratio = Current Assets : Current Liabilities
Quick Ratio
It is the ratio of quick (or liquid) asset to current liabilities. It is expressed as
Quick ratio = Quick Assets : Current Liabilities or Quick Assets Current
Liabilities
The quick assets are defined as those assets which are quickly convertible
into cash. While calculating quick assets we exclude the inventories at the
end and other current assets such as prepaid expenses, advance tax, etc.,
from the current assets. Because of exclusion of non-liquid current assets it
is considered better than current ratio as a measure of liquidity position of
the business. It is calculated to serve as a supplementary check on liquidity
position of the business and is therefore, also known as ‘Acid-Test Ratio’
Solvency Ratios
The persons who have advanced money to the business on long-term basis
are interested in safety of their periodic payment of interest as well as the
repayment of principal amount at the end of the loan period. Solvency ratios
are calculated to determine the ability of the business to service its debt in
the long run. The following ratios are normally computed for evaluating
solvency of the business.
1. Debt-Equity Ratio;
2. Debt to Capital Employed Ratio;
3. Proprietary Ratio;
4. Total Assets to Debt Ratio;
5. Interest Coverage Ratio.
Debt-Equity Ratio
Debt-Equity Ratio measures the relationship between long-term debt and
equity. If debt component of the total long-term funds employed is small,
outsiders feel more secure. From security point of view, capital structure
with less debt and more equity is considered favourable as it reduces the
chances of bankruptcy. Normally, it is considered to be safe if debt equity
ratio is 2 : 1. However, it may vary from industry to industry. It is computed
as follows: Debt-Equity Ratio = Long term Debts − Shareholders' Funds
Debt to Capital Employed Ratio
The Debt to capital employed ratio refers to the ratio of long-term debt to the
total of external and internal funds (capital employed or net assets). It is
computed as follows: Debt to Capital Employed Ratio = Long-term
Debt/Capital Employed (or Net Assets)
3 Proprietary Ratio
Proprietary ratio expresses relationship of proprietor’s (shareholders) funds to
net assets and is calculated as follows : Proprietary Ratio = Shareholders,
Funds/Capital employed (or net assets)
Total Assets to Debt Ratio
This ratio measures the extent of the coverage of long-term debts by assets. It is
calculated as Total assets to Debt Ratio = Total assets/Long-term debts
Interest Coverage Ratio
It is a ratio which deals with the servicing of interest on loan. It is a measure of
security of interest payable on long-term debts. It expresses the relationship
between profits available for payment of interest and the amount of interest
payable. It is calculated as follows:
Interest Coverage Ratio = Net Profit before Interest and Tax Interest on long-
term debts Significance: It reveals the number of times interest on long-term
debts is covered by the profits available for interest. A higher ratio ensures
safety of interest on debts.
Activity (or Turnover) Ratio
These ratios indicate the speed at which, activities of the business are being
performed. The activity ratios express the number of times assets employed, or,
for that matter, any constituent of assets, is turned into sales during an
accounting period. Higher turnover ratio means better utilisation of assets and
signifies improved efficiency and profitability, and as such are known as
efficiency ratios. The important activity ratios calculated under this category are
1. Inventory Turnover;
2. Trade receivable Turnover
3. Trade payable Turnover;
4. Investment (Net assets) Turnover
5. Fixed assets Turnover;
6. Working capital Turnover.
DEBT TO EQUITY RATIO
2023
DEBT TO EQUITY RATIO = DEBT
RATIO
= 2802.14
198.38
= 14.13
2022
DEBT TO EQUITY RATIO = DEBT
RATIO
= 2805.97
185.99
= 15.09
DEBT TO EQUITY RATIO = DEBT
EQUITY
= 2750.09
207.72
= 13.24
CURRENT RATIO
2023
CURRENT RATIO = CURRENT ASSEST
CURRENT LIABILITIES
= 2016.04
2096.38
= 0.96
2022
CURRENT RATIO = CURRENT ASSEST
CURRENT LIABILITIES
= 1903.69
1989.63
= 0.96
2021
CURRENT RATIO = CURRENT ASSEST
CURRENT LIABILITIES
= 2062.05
2136.99
= 0.97
QUICK RATIO
2023
LIQUIDITY RATIO = LIQUID ASSEST
CURRENT LIABILITIES
= 0.00
2096.3
= 0.00
2022
LIQUIDITY RATIO = LIQUID ASSEST
CURRENT LIABILITIES
= 0.00
2166.3
= 0.00
2021
LIQUIDITY RATIO = LIQUID ASSEST
CURRENT LIABILITIES
= 0.00
2082.09
= 0.0
THANK YOU