Financial Ratio Analysis for HSBC

fiscal Ratio Analysis for HSBCHSBC is the Hong Kong and Shanghai Banking Corpo dimensionn, established by Thomas Sutherland, in 1865. HSBC is unmatched of the leading banking group on the fiscal market in the world today. In 2000, it ranked fifth largest global company in the world. HSBCs headquarters is located on the HSBC tower, Canary Wharf, London.HSBC bank is a exclusively owned subsidiary of HSBC Holding plc. The sh ars of HSBC bank be not publicly-traded, that those of HSBC Holdings plc are traded on the London, New York, Hong Kong, Paris and Bermuda stock exchanges.The HSBC Corpo ration has been expanding quick with merger and acquiescing and it ranked second with assets for worlds wealthy company. HSBC has $1.861 trillion in assets as compared to Citigroup, which has $1.884 trillion, 31 Dec 2006. Nearly 22% of HSBCs earnings are derived from Hong Kong, which is one of its major operational bases.HSBC has grown into one of the largest global financial institutions with 9 ,500 offices in 79 countries and identity of HSBC brand have been well recognizing in the world-wide since it established. Known as the worlds local bank, HSBC has a history of helping millions of customers for their financial wishings.FINANCIAL RATIO ANALYSISFinancial ratios for HSBC (2005-2009), for the pains of Foreign money Center Banks are provided below.Industry2009 2008 2007 2006 2005 2009Net lucre margin(%) 9.0 6.1 20.6 20.7 25.1 11.9Return on Equity(%) 4.5 6.1 14.9 14.6 16.1 12.6Return on Assets(%) 0.2 0.2 0.8 0.8 1.1 7.9Debt to law 1.381 2.231 2.121 2.331 2.901 3.681Current Ratio(21) 1.05 1.03 1.06 1.06 1.07 1.40Interest Coverage(times) 1.3 1.2 1.4 1.5 1.7 1.2Profitability RatiosProfitability ratios are show solventiveness of the transmission line with generating profit. This ratio is popular that assessing a business to assess the amount of wealth generating for the amount of wealth invested.In 2009, HSBCs web profit margin ratio (9.0) is dramatically lower than y ear 2005. In 2005 net profit margin ratio is the highest (25.1) in other years. The terminal net profit margin ratio appeared as a 6.1 in 2008 and that had brought by global economic box. There is slightly lower ratio (9.0) on net profit margin compare to its industry (1.9) in 2009.The higher net profit margin explains HSBC has good financial military operation and cost of sales lower than other years in 2005. liquid state RatioHSBCs fluidity ratios are almost remained the same, between 2005 and 2009. Although, HSBC is slightly little(prenominal) liquided than the average firm in the industry, with twain a current ratio and a quick ratio that is lower than the industry average. If a both ratios are lower than its norm (current ratio21, quick ratio11), it could be face liquidity problem.Capital Gearing RatiosCapital gearing is concerned with the relative sizes of the money provided by percent-holders, on the other hand by loan creditors.HSBCs Debt/equity ratio has dropped from (2.90) in 2005 to (1.38) in 2009. The lowest figure (1.38) occurred in 2009 on debt to equity and its dramatically lower than its industry (3.68). Debt to equity ratio indicated that HSBC is less leveraged than other firms in industry. This lower leverage shows HSBC has good financial death penalty in its industry.Management cogency 2010 (1st quarter)HSBC Barclays Industry SP(500)Income/employee 22,226 36,763 66,753 99,430Revenue/employee 238,067 303,095 396,097 896,721Net profit margin 14.0 11.6 11.9HSBC has net profit margin higher than other firms in industry and SP(500). But if we look at productivity of HSBC, and compare to Barclays, its industry and SP(500), its dramatically lower than any other those. Which means productivity is pitiable and $14,537 ($36,763-$22,226) lower than Barclays productivity of per employee. Therefore, there is a conflict between give and theory of (productivity and net profit margin). According to theory productivity should be high if net profit margin high, in that case they are not. Perhaps HSBC need to consider about poor fixed and mediate cost.ConclusionWe need to consider about market efficiency (which orchestrate of efficient market hypothesis). Seems to me, the efficient market hypothesis is involved in semi-strong form, which means we able to use all available public reading including firms data (annual reports, income statement, exchange commission and so forth), competitors financial situation, macro economic factors etc. . .Before we invest 250,000 pound to buy some component of HSBC.HSBC has strong residue sheet, income statement is perfect except some losses between middle 2008 and early 2009 and value earning per share higher than its main competitors of Barclays, SP500, and its industry. The management efficiency little bit poor but the management deed get strong and they making their share price uptrend dramatically since the economic recession (in 2008).HSBCs net profit margin was 9.1% in 2009, no w it is increased at 14% in 1st quarter of 2010. Which means the management performance is strong and marketing is effective in the market place.The history of share price chart is illustrated the share price increased slightly from at the price of 81.00 gross domestic product in September 2005 till at price of 90.00 GDP in December 2007 and it is peaked up at 100.00 GDP in January 2008. January effect is very strong in HSBCs share price. The share price huge difference between End of December and January of either new a year and since 2005, the investors were making profit (3.00 GDP to 5.00 GDP) on per share in 3 weeks.I would like to recommend that we need to make an investment on HSBCs share with 250,000 GDP before January effect (end of December most of the stock holders want to sell their stocks, because of tax issue). The strategy of stock investment is buy-and-hold. That would be good investment for buying HSBCs shares.