HSBC

Company Update:
Mixed set of results, which puts demanding consensus expectations for 2027 and 2028 at risk.

The net profit was broadly in line with consensus expectations.

However, this was due to a lower, but unsustainable cost of risk.

On the other hand, the operating profit before provisions was 3% below expectations, driven by lower revenues, notably lower net interest income (-2%).

The management reiterated its above 17% RoTE objective for 2026, 2027 and 2028.

However, it is worth noting that consensus expectations stand at 18% in 2026 and above all at 19% in 2027 and 2028, which could prove too high in our view.

As a result, we expect some share price weakness today on potential consensus downgrades.

As far as we are concerned, we believe that our 2027 and 2028 forecasts are not at risk as they stand comfortably below consensus expectations.

We stick to our Reduce recommendation.

Expert Opinion:
Stock is down c5.5% in Hong Kong. Wealth performance appears to be the main disappointment: with flat revenue flat at USD2.7bn, compared with 15% growth in Q1 and 23% in Q2. This is important given the strategic emphasis on Asia and affluent customers.

We believe the consensus for 2027 and 2028 is set to adjust down (closer to our estimates) and there are better opportunities in the sector at this stage.  We have an add rating on Barclays and NatWest for UK banks.


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