A pair of brokers cut their share price targets for global banking giant HSBC Holdings PLC (LON:HSBA) today, following yesterday’s big falls in reaction to its 2016 results disappointment, although both retained neutral stances on the stock.
Analysts at Barclays Capital reduced their target price for HSBC shares to 650p from 670p while maintaining an ‘equal-weight’ rating on the stock.
In a note to clients, they said: “So far the market has been willing to look through near-term earnings weakness, focusing on HSBC's US dollar earnings, its exposure to rising US interest rates and the potential for capital return.
“While capital return appears intact and we estimate that each 100bp increase in US short rates can add over 6% to earnings, we'll need to wait some time to see the benefit of rate rises, in our view.”
They concluded: “While estimated yield is attractive at over 7% including share buyback, we believe the 14.5x 2017E earnings multiple and 1.2x tangible book multiple are rich.”
Dust settles …
Meanwhile, analysts at Deutsche Bank reduced their target price for HSBC shares to 635p from 660p and retained a ‘hold’ rating on the stock in a note pointing out that the fourth quarter results “were a large miss to forecast”.
But they added “as the dust (and share price) settles we think the focus will turn to beyond 2017.
The Deutsche Bank analysts said: “HSBC’s gearing to rate rises is now greater (sensitivity is the highest for 15 years) and providing short rates do move up over 2017, we would expect benefits to be felt in 2018.
“Meanwhile the DPS/buyback outlook has not changed from 3Q16, which provides some support for the shares.”
By mid morning trading, HSBC shares had rallied from initial sharp falls to recover 1.1%, or 7.5p at 673.2p.