BofA cuts HSBC stock price target, maintains buy rating

Tuesday, BofA Securities made adjustments to HSBC Holdings ’ (HSBA:LN) (NYSE:HSBC) financial outlook. Analysts at the firm have revised the stock’s price target downward to INR9.60 from the previous INR10.35. Despite this change, the firm continues to recommend a Buy rating for the bank’s shares, which currently commands a substantial market capitalization of $196.31 billion.

HSBC Holdings recently reported robust first-quarter results, with the underlying profit before tax (PBT) surpassing consensus estimates by approximately 15%. The bank’s performance comes amidst a challenging financial landscape marked by declining rate expectations and uncertainties stemming from trade tariffs. However, HSBC’s management has provided guidance that analysts believe is sensible and likely to stabilize investor sentiment, especially considering HSBC’s significant role in global trade. InvestingPro data reveals the bank’s strong momentum, with a remarkable 45.76% total return over the past year and management actively buying back shares.

The current share price, which is around 1.2 times the forecasted FY25 price-to-tangible-book value (P/TBV), is considered by BofA Securities to be fair. This valuation takes into account the expectation that HSBC’s return on tangible equity (ROTE) will continue to be in the mid-teens. Additionally, BofA Securities highlights that HSBC’s shares have underperformed relative to the sector, with a year-to-date increase of approximately 6% compared to the 28% rise of the SX7E, the STOXX Europe 600 Banks Index. Notably, InvestingPro analysis shows the stock trading at an attractive P/E ratio of 8.94 and offering a substantial dividend yield of 12.74%, with four consecutive years of dividend increases. For deeper insights into HSBC’s valuation and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro.

Following the assessment, the new price objective has been set at 960p per ADR, which is equivalent to $64.32, down from 1,035p per ADR or $67. The revision primarily reflects lower revenue forecasts for HSBC Holdings. Despite the reduced price target, BofA Securities’ outlook for HSBC remains optimistic, with the Buy rating being reiterated. According to InvestingPro, analyst targets currently range between $62 and $67, with the consensus maintaining a positive outlook on the stock.

In other recent news, HSBC Holdings Plc (LON:HSBA) is nearing a deal to sell its German fund administration business, Inka, to BlackFin Capital Partners (WA:CPAP). This potential transaction involves managing approximately €400 billion ($436 billion) in assets and could be finalized in the coming weeks. Additionally, BNP Paribas SA (ETR:BNPP) is reportedly in talks to acquire HSBC’s German custodian business, though no final agreements have been reached. In another development, HSBC is considering outsourcing parts of its trading business to reduce IT costs, with preliminary discussions held with firms like Citadel Securities and Jane Street Group. This strategic consideration reflects the challenges HSBC faces in justifying technology investments to stay competitive. Meanwhile, HSBC is contemplating a cautious entry into the private credit market, engaging in discussions with private credit firms, though the talks are at varying stages. The bank’s executives, including CEO Georges Elhedery, have expressed reservations about the potential revenue versus costs. Lastly, HSBC USA Inc. has updated its bylaws to include gender-neutral language and flexibility in board succession planning, aligning with contemporary corporate governance standards.

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