I am delighted with mine Lloyds (LSE: LLOY) shares. They are up 38.98% over the past year and continue to show significant forward movement. Add to that a 4.54% yield and the total 12-month return is 43.52%.

They are rising again today, boosted by news that consumer price inflation has fallen to just 1.7%, well below the Bank of England’s 2% target. This is good news for Lloyds, which remains the UK’s largest mortgage lender and should benefit from falling interest rates. Lower borrowing costs may also reduce debt impairment.

Which FTSE 100 bank is better?

The downside to falling interest rates is that they can reduce Lloyds’ net interest margin, which is the difference between what banks pay savers and what they charge borrowers. In the last quarter of 2023, they dropped to 2.98%, compared to 3.08% in Q3.

Margins in the first quarter of 2024 reached 2.95%, but the group still expects them to remain above 2.9% throughout the financial year.

Where Lloyds’ share price goes next depends partly on the British economy, which has ground to a halt over the summer, and the impact of Labour’s autumn budget.

There is another worry in the form of a financial regulator investigation into claims relating to the mis-selling of motoring finance. The board has allocated £450 million to cover the claims, but the final cost is unknown. Either way, I’m not too worried. I have held Lloyds shares for years and expect to receive significantly more dividend income and share price appreciation over that time.

Given that the stock looks like a decent value, with a price-to-earnings ratio of 7.59 and a price-to-book ratio of 0.8, I was tempted to buy more. But for this FTSE100 compete HSBC Holdings (LSE: HSBA) caught my attention. It boasts even more impressive numbers, as my coarse table shows.

HSBC has a trailing yield of 7.9%. The forecasted profitability is 9.2%. This is definitely more than Lloyds, although the coverage is thinner at 1.5.

Interestingly, both have the same price-to-book ratio of 0.8 and a return on capital employed of 14.6%. Forecast operating margins are slightly higher for HSBC, but both companies perform well in this regard.

Both offer excellent dividend yields

My tables do not show the potential risk/reward ratio, which is completely different. Lloyds is a relatively solid, low-risk company with a focus on retail and petite business banking services in the UK.

HSBC has its sights on all of China and Asia. However, this does not automatically mean that it is a more profitable investment. It is exposed to a slowdown in the Chinese economy. This partly explains why the HSBC share price rose a modest 2.54% last year, a fraction of the growth delivered by Lloyds

HSBC is torn between West and East as Western suspicions of the world’s second-largest economy grow. As the risk decreases, I think it eclipses the misselling of automotive finance.

I may buy some HSBC shares for diversification purposes when I have the cash. However, Lloyds will remain my number one banking stock and one of my favorite stocks in my entire portfolio.