Why I believe today's share price drop is a great opportunity to buy HSBC Holdings plc

Over the last decade HSBC(LSE: HSBA), the FTSE 100's largest constituent, has undergone a painful restructuring that has seen the bank cut thousands of jobs and exit a number of markets around the world. This restructuring, which was intended to streamline the group following its pre-crisis expansion years, is now beginning to pay off.

Returning to growth

Lower costs, coupled with a beneficial market environment helped HSBC report a pre-tax profit of $17.2bn for 2017, compared with $7.1bn for the year before. Profit for the year was hit by a $1.3bn writedown triggered by the reduction in the US corporate tax rate, which meant banks had to book losses on deferred tax assets they built up during lossmaking times. The group has also had to foot the bill for a 40% rise in quarterly loan impairments to $658m, mostly related to expected losses from the collapse of Carillion and South African retailer Steinhoff International.

Revenue for the year hit $51.4bn from $48bn a year ago as the bank benefitted from a robust performance at its retail division. Rising interest rates helped it increase revenues in this division by 9% during the year thanks to growing deposits and a higher interest rate spread -- the difference between what HSBC pays out to depositors and charges to borrowers -- within its key Hong Kong market.

A return to normal

Following the robust results for 2017, HSBC's management is planning to return additional capital to investors, although these returns will have to wait until it has raised $5bn to $7bn of alternative tier one capital. This debt is being issued to meet regulatory requirements that the group has more debt that can be "bailed in" during a crisis. At the end of 2017 the bank's tier one capital ratio had risen to 14.5%, up from 13.6% last year. Stock market listing rules prevent the firm from announcing further stock buybacks while also raising capital.

Still, income seekers should be happy with the news that the bank is planning to pay out an annual dividend of $0.51 for 2017, flat on the year, leaving the shares supporting a dividend yield of 4.8% for the full year.

Buy, sell or hold?

Unfortunately, it would appear as if the market is unimpressed with these results as, at the time of writing, shares in HSBC are trading down by around 4% on the day.

It seems as if traders are dumping shares in the bank as its earnings missed City expectations for the full year. Even though adjusted pre-tax profit grew 11%, it still missed the City's target. Analysts are currently expecting the firm to report earnings per share growth of 5.5% for 2018 leaving it trading at a forward P/E of 14.6. Moreover, for the year it only achieved a return on equity -- a key measure of banking profitability -- of 5.9% below its target of 10% and lagging behind rivals.

Nonetheless, while traders are concerned about HSBC's ability to hit quarterly earnings targets, for long-term investors the results are full of good news. It finally appears as if, after years of restructuring, HSBC is ready to return to growth and management is committed to returning any extra capital to investors, rather than expanding into new markets, repeating past mistakes. With this being the case it could be time to snap up shares in the bank after today's declines.

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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended HSBC Holdings. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.