HSBC vs. SAN: Which Global Bank Deserves a Spot in Your Portfolio?

A comparison of HSBC and Banco Santander (SAN) indicates SAN may be a better near-term investment due to its stronger earnings outlook, 76.6% YTD stock increase, and strategic capital redeployment, including a €10 billion buyback target for 2025-2026 and digital transformation with Openbank; while HSBC's Asia-focused strategy and lower valuation could yield long-term gains, its muted revenue growth and 19.6% YTD stock increase raise near-term concerns.

Analysis

HSBC Holdings plc (HSBC) and Banco Santander S.A. (SAN) are pursuing distinct strategic paths: HSBC is pivoting aggressively towards Asia, focusing on wealth management for high-net-worth individuals in China and India, exemplified by its acquisition of Citigroup's China retail wealth portfolio and plans for 20 new branches in India. This is coupled with a global restructuring involving a $1.5 billion cost-saving initiative and divestment from several non-core markets. However, HSBC's revenue generation has been subdued, and its Zacks Consensus Estimate for earnings growth is 5.1% for 2025 (revised up) and 3% for 2026 (revised down). In contrast, Santander is reinforcing its core European and Americas retail and commercial banking operations, streamlining through actions like the sale of a 49% stake in its Polish unit, which will contribute €3.2 billion towards a €10 billion share buyback target for 2025-2026. Santander is also advancing its digital transformation via Openbank and expects its CET1 capital ratio to temporarily exceed its 12-13% target. Analysts project stronger earnings growth for Santander at 15.7% in 2025 and 7% in 2026, with both estimates revised upwards. This differential is reflected in year-to-date stock performance, where SAN surged 76.6% versus HSBC's 19.6% gain, both compared to the industry's 23.2% rally. Valuation-wise, HSBC trades at a lower price/tangible book (P/TB) of 1.06x compared to SAN's 1.36x, with both below the industry average of 2.29x. HSBC also reports a slightly superior return on equity (ROE) of 12.55% against SAN's 12.26%. Despite HSBC's more attractive valuation multiples and ROE, Santander's stronger earnings growth trajectory, significant stock outperformance, and robust capital return program suggest a more favorable near-term outlook.

Key Decisions for Investors

• Investors with a near-to-medium term horizon might favor Santander due to its superior earnings growth outlook (15.7% for 2025), strong year-to-date stock performance (+76.6%), and significant capital return initiatives, including a €10 billion buyback target for 2025-2026.
• HSBC could be considered by investors with a longer-term perspective who are attracted to its lower valuation (P/TB of 1.06x), slightly higher ROE, and strategic focus on the high-growth Asian wealth management sector, but they should be mindful of current subdued revenue growth and lower near-term earnings forecasts.
• Portfolio allocation decisions should weigh Santander's current momentum and shareholder-friendly policies against HSBC's potential long-term value unlocking from its Asian pivot and global restructuring, considering individual risk appetite and investment timelines for European banking exposure.