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The HSBC (LSE: HSBA) share price has had a terrific year. It’s up 47.75% in that time, which would have turned a £10,000 investment into £14,775.
In fact, the total return would be even higher. With a trailing yield of 5.11%, our investor would have bagged another £511, lifting their total return to £15,286. That’s almost 53%, smashing any savings account in the world. Shares are riskier than cash, but this shows the potential rewards are so much greater.
Over five years, HSBC shares have done even better, up a staggering 230% with dividends on top. But it’s not the only FTSE 100 bank performing well today.
NatWest shares have done even better
The NatWest Group (LSE: NWG) share price is up almost 54% over the last year, and an astonishing 360% over five years, with dividends on top.
The big UK banks struggled for years after the financial crisis, so investors had to endure lean periods before hitting these bumper returns. Equities generally outperform other investments over time, but they don’t climb in a straight line. Patience is essential.
Short-term bumps are inevitable and HSBC has just hit one. Its stock tumbled 7% on 9 October after announcing the £10.7bn acquisition of Hang Seng Bank to consolidate its presence in Hong Kong. Critics questioned the terms and suggested HSBC had better uses for the money.
Many investors may be tempted to take advantage by picking up more HSBC shares at today’s lower valuation. HSBC shares look cheap, with a price-to-earnings ratio of 10.6, which is well below the FTSE 100 average of 15. The bank made a stonking $32.3bn pre-tax profit in 2024, has a solid dividend history, and recently announced a £3m share buyback.
I’m tempted, though its Asian focus exposes it to China’s struggling economy. And brokers are wary. Consensus forecasts suggest HSBC shares could climb just 2.44% over the next year, to 1,014p.
Dividend and growth potential compared
They’re a lot more optimistic about NatWest, with consensus forecasts suggesting a 12.9% rise to 613.8p. That’s more than five times HSBC’s forecast growth.
NatWest will pay more dividends too. HSBC’s forecast to yield 5.2% this year and 5.5% in 2026, the respective figures for NatWest are 5.5% and 6.1%. NatWest is cheaper too, with a P/E of 9.1. It’s also running a share buyback programme of £750m. That’s smaller, but then NatWest is the smaller bank with a market-cap of £43bn, against HSBC’s £172bn.
I actually think both banks are worth considering today, with a long-term view. If I was limited to one, I’d go for NatWest. It’s simpler to understand and seems to have better prospects. As ever, it will depend what other stocks investors hold in their portfolio. For example, if they have plenty of exposure to China, maybe they don’t need HSBC.
I don’t expect either bank to repeat their recent stellar run, but over the longer term, they should provide a steady stream of dividends and growth. This should compound and grow to generate long-term wealth for retirement. That’s what FTSE 100 shares do.
