A £5,000 investment in HSBC (LSE:HSBA) shares through a Stocks and Shares ISA five years ago would have turned into a remarkably profitable holding.
The shares have risen 214% over that period, meaning the original investment would now be worth around £15,700. But that’s only part of the story. Once dividends are included, total shareholder returns would have climbed to approximately £18,260.
That equates to a compound annual return of 29.6% — comfortably ahead of the FTSE 100 over the same period. Even more impressively, based on the original purchase price, the dividend yield today would be a hefty 12.7%.
The obvious question is whether investors can realistically expect anything close to that level of return over the next five years.
A stronger bank
One reason I think HSBC can continue creating value is that it looks like a stronger business today than it did five years ago.
The bank is becoming simpler and more focused, exiting lower-return operations while cutting costs and streamlining management. That matters because higher returns don’t always come from growing bigger. Often they come from running a business more efficiently and allocating capital more effectively.
The results are already showing up in the numbers. Last year, return on tangible equity reached 17.2%, while profits climbed to a record $36.6bn.
Positioned where growth is strongest
The second point is geography.
While many investors still view HSBC through a UK lens, I increasingly see it as a bank positioned at the centre of some of the world’s most attractive growth markets. Asia and the Middle East are becoming increasingly important drivers of global trade, investment, and wealth creation.
That matters because wealth management is one of the most attractive areas of banking. As individuals become wealthier, demand grows for savings, investment, and advisory services. The company already has a strong presence across these regions and is using that network to capture more of those flows.
The numbers suggest it’s working. Wealth revenues rose 24% last year, while the bank attracted $80bn of net new invested assets. With Asia expected to account for a growing share of global wealth over the coming decade, I think this remains one of the most compelling parts of the long-term investment case.
Risks to consider
HSBC’s global reach is a strength, but it also creates risks. A large share of profits comes from Asia, meaning any prolonged slowdown in China or disruption to regional trade could weigh on growth. Tariffs and geopolitical tensions remain key uncertainties here.
The second risk is interest rates. Falling rates helped support economic activity, but lower borrowing costs can also pressure banking margins over time. While HSBC benefits from a strong deposit base and diversified income streams, weaker global growth or a sharper-than-expected decline in rates could make sustaining today’s strong profitability more challenging.
Bottom line
HSBC has been a terrific investment over the past five years, helped by a changing backdrop for banks and a more focused business model. I doubt the next five years will deliver quite the same spectacular returns, but I still see it as a high-quality long-term holding. It remains a core position in my own ISA portfolio and one investors may wish to consider.
But while HSBC remains a core holding, it’s not the only growth stock on my radar.
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Andrew Mackie owns shares in HSBC.
