On Tuesday, Morgan Stanley (NYSE:MS) made an adjustment to the price target for HSBC Holdings (LON:HSBA:LN) (NYSE: NYSE:HSBC), reducing it from INR 8.36 to INR 8.02, while maintaining an Equalweight rating on the stock. Currently trading at $56.34 with a market capitalization of $196 billion, InvestingPro analysis suggests HSBC is slightly overvalued at current levels. The revision followed HSBC’s recent financial performance which, according to Morgan Stanley, presented mixed results.
HSBC’s adjusted profit before tax (PBT) exceeded Morgan Stanley’s estimates (MSe) and the consensus by 16/15%. The banking net interest income (NII) aligned with both MSe and consensus expectations. However, HSBC’s Other Income outperformed, coming in 16/15% higher than anticipated, contributing to a total revenue beat of 6%. This outperformance in Other Income was a significant factor in the overall revenue figures, with total revenue reaching $61.25 billion in the last twelve months. InvestingPro data shows HSBC maintains a "GOOD" overall Financial Health score, with particularly strong momentum metrics.
In terms of expenses, HSBC managed to perform better than expected, with costs coming in 5/4% lower than Morgan Stanley and consensus predictions. On the other hand, provisions were reported to be 1-3% higher, which included adjustments based on updated macroeconomic assumptions. Notable items for the period were a negative $282 million, and the impact on BoCom, which is expected to be between $1.2 billion and $1.6 billion, will be recorded once the dilution is actualized. Morgan Stanley had anticipated this to be reflected in the first quarter of 2025.
The bank’s Common Equity Tier 1 (CET1) ratio was reported at 14.7%, which is 10-20 basis points below expectations, partly due to higher underlying loan growth. In a move that met market expectations, HSBC also announced a new $3 billion share buyback program and confirmed the dividend would remain at $0.10. The bank has demonstrated strong shareholder returns, with dividend growth of 98% over the last year and a consistent track record of raising dividends for four consecutive years. Lastly, the tangible net asset value (TNAV) per share stood at $9.08. For deeper insights into HSBC’s financial health and detailed analysis, investors can access the comprehensive Pro Research Report available on InvestingPro, which covers over 1,400 top stocks with expert analysis and actionable intelligence.
In other recent news, HSBC Holdings reported first-quarter results that exceeded expectations, with underlying profit before tax surpassing consensus estimates by approximately 15%. This performance comes despite a challenging financial environment, marked by declining rate expectations and trade tariff uncertainties. Bank of America (NYSE:BAC) Securities has adjusted HSBC’s stock price target downward but maintains a Buy rating, reflecting a positive outlook despite lowered revenue forecasts. Additionally, HSBC USA has updated its bylaws to incorporate gender-neutral language and revised non-executive director appointment terms, aligning with modern corporate governance standards.
HSBC is also exploring a cautious entry into the private credit market, initiating discussions with private credit firms about potential partnerships. However, the bank remains wary due to concerns about the economic climate and potential costs. In another development, HSBC is considering outsourcing parts of its trading business to reduce costs, exploring partnerships with firms like Citadel Securities and Jane Street Group. This move highlights the challenges even large banks face in maintaining competitive technology investments. Lastly, HSBC executives participated in a call with other global bank leaders to discuss the economic impact of recent tariffs, underlining the financial sector’s concerns about potential negative effects on the economy.
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