HSBC Shares Seen as 39% Undervalued, Analysts Forecast Growth

HSBC’s share price currently sits at approximately £10.38, which some analysts believe is significantly undervalued. A recent discounted cash flow analysis suggests that the fair value of HSBC shares is around £17.02, indicating a potential upside of 39% from the current price. This assessment is drawing attention from investors who are evaluating the bank’s growth potential.

The share price has seen a notable rise of 49% since hitting a 12-month low of £6.98 on April 9, 2023. While this increase may deter some investors who fear a plateau in price, others view this as an opportune moment to invest in the bank, which has recently shifted its focus towards fee-based revenue streams rather than traditional interest-based income.

Evaluating Growth Potential

Analysts emphasize the importance of free cash flow as a crucial driver of a company’s growth. For banks like HSBC, robust free cash flow is essential for funding expansion and increasing shareholder value through rising share prices and dividends. A key consideration for HSBC is the risk posed by declining interest rates in its primary markets, which could impact profit margins.

Despite this potential challenge, the consensus among analysts is optimistic, with forecasts indicating an average earnings growth of 13.8% per year through to the end of 2027. Recent financial results lend credence to this outlook. For the full year 2024, HSBC reported a pre-tax profit of $32.3 billion (approximately £24.6 billion), reflecting a $2 billion increase from the previous year. This growth was bolstered by a strategic pivot towards wealth and personal banking, which contributed over a third of total profits for 2024.

The bank’s leadership aims to achieve a return on tangible equity (ROTE) in the mid-teens from 2025 to 2027, a metric that focuses on tangible assets and excludes intangible components like goodwill.

Recent Developments and Investment Outlook

HSBC’s latest quarterly results, released on October 28, 2025, revealed a $1.1 billion charge related to the infamous Bernard Madoff Ponzi scheme. Despite this significant setback, the bank recorded a 15% increase in profit before tax from the previous quarter, amounting to $7.295 billion. In light of these results, HSBC has adjusted its ROTE target for the year to be “mid-teens or better.”

Mark Rogers, an investment expert, expresses confidence in HSBC’s growth trajectory. He notes that he has already invested in the bank at lower prices and plans to acquire additional shares due to the promising earnings growth and the current undervaluation of the stock. Rogers also highlights that HSBC is not the only stock displaying potential in the finance sector, indicating a broader trend of recovery and opportunity.

Investors considering a stake in HSBC may find that the current share price presents a compelling entry point, particularly as the bank continues to adapt its business model to changing market conditions. As analysts predict continued growth, the gap between the current share price and its fair value could translate to significant long-term profits for shareholders.