Zacks Industry Outlook Highlights HSBC, ICICI Bank and Barclays

Globe and Mail

2 days ago

For Immediate Release
Chicago, IL – June 11, 2025 – Today, Zacks Equity Research discusses HSBC Holdings plc HSBC, ICICI Bank Ltd. IBN and Barclays PLC BCS.
Industry: Foreign Banks
Most banks across the globe have been continuously restructuring their businesses to focus on core operations. While these initiatives are expected to result in elevated expenses, they will drive growth in the long run. Though the uneven economic recovery in developed and emerging nations has been hurting revenue growth for companies within the Zacks Foreign Banks Industry, relatively lower interest rates will likely provide support.
Thus, despite geopolitical and macroeconomic woes, industry players like HSBC Holdings plc, ICICI Bank Ltd. and Barclays PLC are well-poised to gain from business streamlining efforts and relatively lower rates.
About the Industry
The Zacks Foreign Banks Industry consists of overseas banks with operations in the United States. Since a foreign banking organization may have federal and state-chartered offices in the country, the Federal Reserve plays a major role in supervising their U.S. operations.
In addition to providing a broad range of products and services to customers in the United States, the banks offer financial services to corporate clients having businesses in the country. The financial firms establish relations with U.S. corporations operating in their home countries.
Some units of foreign banks offer a broad range of wholesale and retail services and conduct money-market transactions for their parent organizations. Some industry players are involved in developing only specialized services like wealth/asset management and investment banking.
3 Themes Influencing the Foreign Banks Industry
Restructuring Efforts: Several foreign banks have continuously been undertaking business restructuring initiatives. Many banks have been divesting or closing non-core operations to increase focus on core businesses and profitable markets. Through this, industry players are changing their revenue mix and aiming to expand to other lucrative operations.
Relatively Lower Interest Rates: Given that inflation numbers are gradually cooling, central banks globally have started lowering interest rates. This is expected to support foreign banks' net interest income (NII) and margins, which were under pressure because of higher funding/deposit costs. With falling rates and decent economic growth, demand for loans is expected to improve. Industry players are likely to witness NII expansion.
Further, efforts taken by most banks to diversify revenues to become less dependent on spread income are likely to aid non-interest income. Also, lower interest rates will likely lead to the revival of investment banking business and support wealth/asset management operations. Hence, industry players are likely to record an increase in revenues in the coming quarters.
Uneven Global Economic Recovery: Following the COVID-19 pandemic, global economic recovery has been uneven. In many regions, economic growth has slowed but not fully recovered from the pandemic's effects, while geopolitical headwinds are hurting the economy in others. Banks' performances are directly linked to the performance of the overall economy. Weak economic growth in their home markets may hurt foreign banks' profitability to some extent in the upcoming period.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Foreign Banks Industry is a 64-stock group within the broader Zacks Finance Sector. The industry currently carries a Zacks Industry Rank #14, which places it in the top 6% of more than 250 Zacks industries.
The group's Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates outperformance in the near term. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
The industry's positioning in the top 50% of the Zacks-ranked industries is because of the encouraging earnings outlook for the constituent companies in aggregate. The aggregate earnings estimate revisions show that analysts are gaining confidence in this group's growth potential. Since November 2024, the industry's earnings estimates for 2025 have been revised 11.3% upward.
Hence, we present a few stocks from the industry that you may want to keep an eye on. But before that, let us check out the industry's recent stock market performance and valuation picture.
Industry vs. S&P 500 & Sector
The Zacks Foreign Banks Industry has outperformed the S&P 500 and its sector in the past two years. Stocks in the industry have collectively surged 60.8%. The S&P 500 composite has rallied 38.8% and the Zacks Finance Sector has appreciated 45%.
Industry's Valuation
One might get a good sense of the industry's relative valuation by looking at its price-to-tangible book ratio (P/TBV), which is commonly used for valuing foreign banks because of large variations in their earnings results from one quarter to the next.
The industry currently has a trailing 12-month P/TBV of 2.34X. This compares with the highest level of 2.46X, the lowest level of 1.03X and the median of 1.69X over the past five years. The industry is trading at a significant discount compared with the market at large, as the trailing 12-month P/TBV for the S&P 500 composite is 12.80X, which the chart below shows.
As finance stocks typically have a lower P/TBV ratio, comparing foreign banks with the S&P 500 might not make sense to many investors. However, a comparison of the group's P/TBV ratio with that of its broader sector ensures that it is trading at a decent discount. The Zacks Finance Sector's trailing 12-month P/TBV of 5.33X and the median level of 4.68X for the same period are above the Zacks Foreign Banks Industry's ratios.
3 Foreign Bank Stocks to Consider
HSBC: Headquartered in London, HSBC is a major global banking and financial services firm with $3.05 trillion in assets as of March 31, 2025. The company has been committed to bolstering its performance, focusing on building operations across Asia. It intends to position itself as a top bank for high-net-worth and ultra-high-net-worth clients in the region.
In mainland China, HSBC has been growing its wealth business through lifestyle-focused centers, acquisitions like Citigroup's retail wealth arm, digital upgrades and talent hires. In India, the company is expanding rapidly, with approval to open 20 new branches, adding to its current 26. As the country's wealthy population surges, HSBC is boosting its presence through initiatives like launching Global Private Banking, acquiring L&T Investment Management and enhancing Premier Banking. These initiatives will likely help the company strengthen its position in the region.
Moreover, in sync with its Asia pivot strategy, HSBC announced plans to redeploy an additional $1.5 billion from the reallocation of costs from non-strategic or low-returning activities into its core strategy, wherein it has competitive strength. The bank is winding down its mergers and acquisitions, and equity capital markets operations in the U.K., Europe and the United States while maintaining a more focused presence in Asia and the Middle East.
It is also progressing with divestments in Germany, South Africa, Bahrain and France, and has begun a strategic review of its business in Malta. Apart from these, HSBC completed the sale of its businesses in the United States, Canada, New Zealand, Greece, Russia, Argentina and Armenia, as well as the retail banking operations in France and Mauritius.
Further, HSBC has been restructuring its operations to improve operating efficiency. In February 2025, the company announced a $1.5-billion cost-saving plan from the organizational simplification efforts (to be achieved by 2026). It will likely incur $1.8 billion in total severance and other upfront charges by the end of next year to implement these efforts.
Shares of the company have risen 24.4% on the NYSE in the past six months. The Zacks Consensus Estimate for its current-year earnings has moved marginally higher in the past 60 days. Currently, HSBC carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
ICICI Bank: Headquartered in Mumbai, India, ICICI Bank is one of India's largest private sector banks, with total assets worth INR21,182.39 billion ($247.8 billion) as of March 31, 2025.
The bank is making commendable progress in improving digital banking services for retail and corporate clients. IBN has been striving to provide superior end-to-end seamless digital services, personalized solutions and value-added features to enable data-driven cross-sell and up-sell opportunities. The increasing adoption of the bank's mobile banking app — iMobile Pay — is helping garner a solid market share. Apart from this, the company's digital platform for businesses has witnessed tremendous growth in the past few quarters.
These efforts are leading to a rapid increase in end-to-end digital sanctions and disbursements across various products.
Moreover, ICICI Bank has been leveraging its technological initiatives to augment the contribution of non-interest income toward its top line. The company has been continuing to enhance the use of technology in its operations to provide simplified solutions to customers. The company has introduced DigiEase, a digital platform designed to streamline the customer onboarding process for Business Banking. Further, iLens, the retail lending platform, is being upgraded on an ongoing basis, with retail credit cards now integrated into the platform along with mortgages, personal loans and education loans.
These digitization efforts have started bearing fruit, and non-interest income continues to improve. The metric increased 15.9% in fiscal 2025 and 15% in fiscal 2024, following a 13% rise in fiscal 2023 and 27% growth in fiscal 2022. Efforts to digitize operations and an increase in mobile banking transactions will likely continue to help the company garner more fee income.
Shares of this Zacks Ranked #3 company have risen 7.8% on the NYSE in the past six months. The Zacks Consensus Estimate for its current fiscal-year earnings has moved marginally lower in the past 60 days.
Barclays: Headquartered in London, Barclays is a major global banking and financial services company with £1,593.5 billion ($2,061.1 billion) in total assets as of March 31, 2025.
Barclays' initiatives to improve efficiency over the last few years have been bearing fruit, as evident by a fall in expenses. While total operating expenses increased in 2022, 2023 and the first quarter of 2025, the metric declined in 2024, with the negative compound annual growth rate (CAGR) being 2.4% over the six years ended 2021. Overall expenses are expected to be manageable as business restructuring initiatives continue to provide support.
The company intends to undertake further cost-saving actions to improve efficiency. Structural cost actions have resulted in gross savings of £1 billion in 2024 and £150 million in the first quarter of 2025. Barclays aims to achieve gross efficiency savings of £0.5 billion in 2025. By 2026-end, management expects total gross efficiency savings of £2 billion and the cost-to-income ratio to be in the high 50s.
Barclays has been striving to simplify operations and focus on its core businesses. In April 2025, it announced a collaboration with Brookfield to transform its payment acceptance business. In February 2025, it divested its Germany-based consumer finance business. In November 2024, the company acquired Tesco's retail banking business, which complement its existing business and strengthen its position in the market.
In 2024, it divested its Italian mortgage portfolio. The company sold $1.1 billion in credit card receivables to bolster the lending capacity for Barclays Bank Delaware in the United States. Driven by these initiatives, the company's profitability is expected to improve over time.
Currently, Barclays carries a Zacks Rank of 3. BCS shares have gained 32.8% on the NYSE in the past six months. The Zacks Consensus Estimate for the company's 2025 earnings has moved 6.2% higher in the past 60 days.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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