Wednesday, May 6, 2020

Stock Prices of HSBC

Question: Describe about the Stock Prices of HSBc? Answer: In the above chart stock prices of HSBC are compared with SP500. After years of continuous declines, industry revenue is expected to finally pick up in 2015 as the US economy strengthens. The Federal Reserve in its most recent minutes has provided positive forward guidance regarding interest rates, which are expected to rise by mid-2015. Consequently, borrowing activity is expected to increase prior to the spike in interest rates as consumers and businesses try to lock-in lower rates on loans. Furthermore, an increase in interest rates is expected to generate higher income for industry operators by increasing the spread between the rate the banks pay on deposits and the rates at which they lend money. An improving economy is also releasing pent-up demand for credit. Auto loans are on the rise, and access to credit is expected to increase 6.5% in 2015. This is the highest year-on-year increase over the five years to 2015. A recovering credit market is expected to boost the industry's interest and noninterest income as banks are anticipated to earn more revenue in fees due to a greater volume of loan origination. Consequently, IBISWorld expects revenue to increase 1.2% over 2015. The government spent billions of dollars to prop up the Commercial Banking industry and the economy during the recession, but the consumer credit market has continued to thaw slower than anticipated. The Federal Reserve has tried to stimulate the economy by adjusting interest rates, which still remain at all-time lows, hovering between 0.0% and 0.3%. However, because credit markets are subject to continued economic uncertainty due to the European sovereign debt crisis and Standard Poor's downgrade of US so vereign debt in August 2011, these low interest rates remain unappealing to depositors and borrowers alike. In addition, volatile capital markets, coupled with sluggish income growth, have increased US consumers' uncertainty, which has only caused more struggles for the credit market. Consumers have continued to remain uncertain about the economy and therefore cautious with their spending. Consequently, an increasing number of consumers have been putting money into banks or government treasuries. According to the FDIC, industry deposits have grown at an annualized rate of 7.0% in the five years to 2014 (latest available data) to about $9.3 trillion. While cash flow into banks has increased, there has also been a large decline in the outflow of funds in the form of loans. Nonetheless, signs of improvement have persisted in 2014 and 2015, especially from the automobile sector. Recently, the largest commercial banks have been meticulous about granting refinance requests. Typically, homeowners must have substantial equity in the house, good credit and a reliable source of income to receive refinancing. Since the recession, many consumers have been unable to meet these requirements, which have prompted government institutions, such as Fannie Mae and Freddie Mac, to ste p up and help borrowers by backing their refinanced loans. Between 2009 and 2012, Freddie Mac helped more than 5.4 million homeowners refinance their mortgages, while also assisting about 700,000 homeowners in avoiding foreclosure. Since many commercial banks are Freddie Mac-approved lenders, they benefit from these institutions' efforts to help distressed homeowners.

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