HSBC
HSBC Holdings plc
$93.90
Banks, Insurers & Asset Managers
85%
P/Tangible Book × ROE Quality
Moderate
·
Conviction
Undervalued
Trading 25.0% below fair value
You pay
$93.90
Bear
$78.35
Fair
$125.25
Bull
$153.38
Bear
$78.35
-16.6%
ROTCE 9.0% → 1.45x TBV
Fair
$125.25
+33.4%
ROTCE 12.0% → 2.33x TBV
Bull
$153.38
+63.3%
ROTCE 13.8% → 2.85x TBV
Adjust Assumptions
12.0%
7.5%
Key Value Driver
ROTCE (12.0%) vs. cost of equity (7.5%)
Implied Market Multiple
1.74x
Analyst Consensus (External Reference)
Never blended into the bear/base/bull estimates above.
Average Target (21 analysts)
$52.00
Divergence from AlphaVal
141%
Summary
With ROTCE of 12.0% vs. 7.5% cost of equity, fair P/TBV is 2.33x on $53.86 tangible book, implying $125.25 per share. DDM cross-check: $119.47.
Warnings
Traditional cash flow models don't work well for banks — lending activity distorts how much cash the business actually generates.
Common valuation shortcuts don't apply here — for banks, interest payments are a core business cost, not overhead.
Wall Street's average price target is $52.00 (from 21 analysts). Our estimate is 141% above the consensus -- consider that gap carefully.
Key Risks
- Book value quality matters as much as level — check loan loss reserves
- Interest rate sensitivity creates non-linear earnings surprises
- Insurance reserving is actuarial, not financial — errors emerge slowly