Seeking Alpha: HSBC Has A Valuable Core Franchise, But A Lot Of Work To Do

The giant global franchises of Standard Chartered (OTCPK:SCBFF), Citigroup (C), Deutsche Bank (DB), and HSBC (HSBC) definitely didn't live up to the notion that a global footprint would insulate them in tougher times. In the particular case of HSBC, it got to a point where some started asking whether it was actually a good global bank or just a very good Hong Kong bank with a lot of foreign market albatrosses dragging it down.

The truth, as is often the case, is somewhere between. HSBC certainly made some big mistakes in markets like the U.S., and the China operation has its challenges today, but Hong Kong continues to be exceptionally profitable and the large low-cost deposit bases in the U.K. and U.S. give the company attractive leverage to rising rates.

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HSBC Has A Valuable Core Franchise, But A Lot Of Work To Do

Seeking Alpha: DBS Group Offers A Quality Play On Growth In China And ASEAN

Singapore's DBS Group (OTCPK:DBSDY) (DBSM.SI) is a different sort of bank for those readers more accustomed to the likes of Citigroup (C) or Wells Fargo (WFC). Residential lending is a smaller part of DBS Group's business and the company instead makes a significant amount of profits by extending trade and supply chain financing to companies operating in/from China, Hong Kong, and Taiwan. Management has made a lot of improvements to the operating model since 2009 and while the company's growing Chinese footprint presents some risks, there's a respectable amount of upside in the shares of one of Asia's best banks.

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DBS Group Offers A Quality Play On Growth In China And ASEAN

Investopedia: Global Giant HSBC Still An Attractive Story

When I last wrote on HSBC (NYSE:HBC) about 18 months ago, I was positive on this global banking giant. In the intervening period the shares are up about 30% (excluding a pretty solid dividend), making that a pretty solid call. Although HSBC's second quarter/first half results were not perfect by any means, this isn't a bank that runs itself on a quarter-by-quarter basis and I see little to quibble with in the bank's excellent ratios and profits, nor its policy of redirecting copious surplus capital to both growing markets and shareholders. With the shares about 10% to 15% undervalued, there's still a case to be made for buying/holding these shares.

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http://www.investopedia.com/stock-analysis/080713/global-giant-hsbc-still-attractive-story-hbc-c-san.aspx

Investopedia: The Uneven Consequences Of Corporate Misbehavior

Who, or what, you are, really does seem to matter in America. While corporations may be techno-legally "people," they are seldom treated as harshly as private citizens when it comes to breaking the rules. There are many reasons why you may hate big business. A cynic may say that this is because of the huge contributions they funnel to politicians, while a more charitable argument could be made that the jobs and tax revenue created by corporations create the possibility of substantial collateral damage. Whatever the reason, given the differences in prosecutions and punishments between street crime and corporation crime, it is worth asking if governments really care about the misbehavior of corporations.

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http://www.investopedia.com/articles/economics/12/governments-care-corporate-misbehavior.asp

Investopedia: Just How Messy Will The Standard Chartered Affair Get?

It seems like banks just can't keep themselves out of trouble. While the markets have largely moved on from the self-inflicted wounds of irresponsible mortgage lending and securitizations, and most European banks have stabilized their sovereign debt risk, new scandals are filling in to replace the old. Regulators are wrestling with the possibility of a sizable conspiracy to manipulate LIBOR rates, and if that wasn't enough, large Asia-focused Standard Chartered (OTC:SCBFF) finds itself in the eye of a hurricane over alleged dealings with Iran.

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http://stocks.investopedia.com/stock-analysis/2012/Just-How-Messy-Will-The-Standard-Chartered-Affair-Get-SCBFF-ING-HBC-BCS0809.aspx

Investopedia: DBS Group - A Balanced Play On Asian Banking

It's too bad that more investors don't look to American Depositary Receipts as viable options to invest overseas, as many good companies are available with little sacrifice in volume or shareholder friendliness. One of the names well worth considering is Singapore's DBS Group (OTCBB:DBSDY.PK). While this bank does have some risks in its funding and its growing emerging market businesses, it has built a reputation over the years as a conservatively-run bank.

Looking To Go 40/30/30
Right now, Singapore is still a major component of DBS Group's earnings base (nearly 60%), with Greater China chipping in about 24% and countries in the Association of Southeast Asian Nations (ASEAN) another 10%. Although Singapore will likely always remain an important operating area, DBS management is hoping to move its earnings base to something closer to a 40/30/30 model - 40% from Singapore, 30% from Greater China and 30% from ASEAN.

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http://stocks.investopedia.com/stock-analysis/2012/DBS-Group--A-Balanced-Play-On-Asian-Banking-DBSDY-HBC-C-USB0411.aspx

Investopedia: HSBC On A Faster Track To Recovery

With Europe still spasming over the debt problems in Greece, Ireland and Spain, the U.S. still trying to digest billions in bad debt and foreclosed houses, China trying to slow down inflation and Japan trying to rebuild, these are not easy days to be a bank. No surprise, then, that names like Citigroup (NYSE:C) and Bank of America (NYSE:BAC) look cheap compared to historical price-book metrics. But the situation is a little different at HSBC (NYSE:HBC). This is not a perfect bank, but it looks like it's further down the road to recovery than its valuation would suggest. 

More Progress in the First Half
Admittedly, HSBC's numbers are not the easiest fodder for casual analysis, as plenty of "items" have to be backed out. Going by the reported results, pre-tax profits were up 3% on an annual comparison, with net interest income up 2%. An alternative look at the numbers shows core revenue down about 2%, with weakness in the U.S. and Europe offset by excellent results in Hong Kong and emerging markets.




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http://stocks.investopedia.com/stock-analysis/2011/HSBC-On-A-Faster-Track-To-Recovery-HBC-C-BAC-FNFG-BCS-MTB-STD0806.aspx