HSBC Holdings plc. Analysis


HSBC Holdings plc. Is among the leading multinational banking corporations in the world. The company name is derived from initials of The Hong and Shanghai Banking Corporation Limited. Hong Kong and shanghai are the origins of this bank and was first established in 1865.Over the years, the company has grown and currently has over 7200 offices in over 85 countries. The company has stretched its services in Africa, Middle East, Asia, Europe and United States of America. It is believed to serve almost 128 million customers globally. The major services offered by the company include commercial banking, private banking, retail banking and wealth management and global banking and markets.

HSBC holdings have been noted as the largest bank in the world asset wise and the sixth largest listed company.  The company is listed in several stock markets such as the London stock exchange, Hong Kong stock exchange, Bermuda stock exchange and the New York stock exchange. It is essential to note that the company is the second largest company listed in the London Stock Exchange.  The company has unprecedented international presence which can be ascertained by the ever increasing number of shareholders which is currently at 210,000. The company’s headquarters were initially in Hong Kong which later changed to London in 1993. The relocation to London was as a result of a series of mergers and acquisitions which lead to unprecedented growth of the company. The London headquarters were officially opened in April 2003.


In every business entity, there are both internal and external environments that affect the overall performance of the business. The changes in business environment are likely to create either great opportunities or threats to the running of the business.for instance, an organization is lkely to realize opportunities from new technologies that can help in reaching to ore customers and  changed government policies likely to open up more markets. On the other hand there is high likelihood of threats to the business in case of increased interest rates, high inflation and shrinking market which would subsequently lead to increased cost of running the organization.

In order for the management of an organization to realize this, it is essential to conduct a PEST analysis of the organization. This is a very important tool that helps organization management to understand the external environment within which an organization operates. This outlines political, economic, social, technological, legal and environmental factors that affect the running of an organization. The analysis is of great importance to the organization as it helps in strategic decision making. The management can take advantage of the opportunities offered and take mitigating actions to reduce impacts of possible threats. PESTLE analysis is mostly concerned with the external environment within which the business operates and management has little or no control.

Political environment

Political environment is a crucial factor that determines success or failure of a business entity. Positive political environment is essential for thriving of a business entity while negative political factors are detrimental to the running of the business.  These political factors include political stability, tax policies, labour laws, trade restrictions to name but a few. HSBC holdings plc. is a multinational corporation which operates in different destinations all over the world. These different states have different political entities all of which the company must comply with. The different political decisions taken by the different states have significant impact on the realization of the company’s objectives.

One of the most critical factors considered by the HSBC is the political stability of the host nation. It is critical that the company only invests in politically stable countries. Some factors greatly hinder the growth of the company. For instance, in some countries, the company is forced to collaborate with other smaller organizations. It is also crucial to note that HSBC strictly complies with government laws and regulations such as tax legislation.

Economic factors

The fact that the organization has a global presence poses great economic concerns. This is because there are numerous inherent threats and uncertainties involved. Several factors such as inflation change in exchange rates, volatile stock markets in various world markets have been of great concern to the company. For instance, volatility in interest rates in the Middle East and South Africa has been the notable undoing to the success of the organization. Global economic recessions and unemployment in various states have also greatly affected the organization. However, being among the leading financial service provider globally, the company enjoys a secure and successful economic strength.

Social factors

Social factors are also of great concern in the strategic decisions of an organization. This is because every business operates in a society which forms the customer base of the company’s products. Over the years, HSBC has strived to create a good image to the society. In order to achieve this, the organization has partnered with several charitable organizations globally to which it contributes monetary support. The company has heavily invested in education, environment and community health in an attempt to promote its position socially.

Technological factors

In the recent past, the world has registered great milestones in terms of technological advancement.  This has been in terms of information technology, internet and other technological advancements which has been critical in the performance of HSBC. Advances in technology have affected the company both positively and negatively. For instance, HSBC has been a victim of online frauds which has resulted to the company suffering immense losses. Technical challenges have also been frequent in the organization which has resulted to loss of large number of customers to other competing banks. This happened after there was a substantial leakage of vital customer information. Nevertheless, the organization has adopted the technological advances to its benefit such as in advertising and promotional practices.


SWOT analysis is another critical marketing tool. It involves analysis of both internal and external environment affecting an organization. It refers to internal strengths and weaknesses to a firm and the external environment which provides threats and opportunities to the organization.


  • Proper understanding of international finance
  • Listed in London and Hong Kong primarily
  • Better established in the Chinese market


  • Poor performance of the personal financial services
  • It was late in defining the brand name (the company had set up different companies with different names)


  • Substantial growth in emerging economies.
  • Low mortgage interest rates.


  • The changing global regulations.
  • Economic slowdown in many countries such as US and Europe.
  • Increase in competition


Determining a financial position of a company is a very important aspect in strategic planning of the company. Financial position can only be determined through critical analysis of financial statements of the company. The elements in the financial statements can be compared with those of other companies within the same industry.  Financial ratios are also important in determining the financial position of the organization.  These are very important indicators of the firm’s performance and its financial situation. The calculation of these ratios is enabled by information obtained from the financial statements of the organization.  They help in comparison and trend analysis within an organization.  The most frequently used ratios include; profitability ratios, asset turnover ratios, divided policy ratios and liquidity ratios.

Liquidity ratios

These are very essential ratios that outline the firm’s ability to meet its short term financial responsibilities. This information is particularly important to financiers of the organization and they include the current ratio and the quick ratio. Current ratio is given by dividing the current assets by the current liabilities. Most short term creditors prefer high liquidity ratios which may not be the case to the shareholders. This is because high liquidity  reduces risk on the side of the creditors while on the shareholders side it implies that most of the company’s assets are used for repaying debts rather than for growth purpose of the organization. For instance, according to the financial statements as at Dec 31 2011 current assets were at $ 89,000 and current liabilities at $ 61,000. Current ratio is given by 89,000/61,000= 1.45. This indicates a strong position as the current assets of the organization can easily meet the debts as they fall due. A current ratio of greater than 1 is recommended as it indicates a strong financial position of the organization.

Profitability ratios

Profitability ratio analysis is another important aspect in determining an organizations financial position. The most commonly ratios in profitability are ROA and ROE. ROA is a vital analysis as it depicts the management’s effectiveness in generating profits from the available firm’s assets. ROE on the other hand explains the stockholders gain in terms of profits as related to their equity. ROE= net profit after taxes/stockholders equity. The latest financial statements (Dec 2012) of the company indicates ROA as at 0.58% while ROE is at 8.78%. These are indicators of a strong financial position.  It is clear from yahoo finance that the company registered profits of 23.37% which shows that the shareholders of the company are generating good profits.

HSBC has a strong financial base. The company has several sources of revenue which include sale of shares and borrowing. HSBC is listed in major stock markets all over the world. It was primarily listed in Hong Kong and London stock exchanges. It was later listed in New York stock exchange and Bermuda stock markets. This trend has made the company have a global presence as well as stabilizing its sources of finance. The company’s financial strength can also be evidenced through its ever increasing assets which as at 31st Dec 2012 stood at $ 2.693 trillion. The company is also the second largest listed company in the London stock exchange with a market capitalization of £102.7 billion as at 6th July 2012.



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