Citi maintains Buy on HSBC stock with GBP8.90 target

Tuesday, Citi analysts, led by Andrew Coombs, reaffirmed a Buy rating on HSBC Holdings (HSBA:LN) (NYSE: NYSE:HSBC) with a price target of GBP8.90. The banking giant, currently trading near its 52-week high at $51.69 and boasting a market capitalization of $180.48 billion, has shown impressive momentum with a 23% gain over the past six months. According to InvestingPro data, the stock maintains a "GREAT" financial health score, supporting the bullish analyst consensus. The endorsement comes amidst reports that the banking giant is planning to withdraw from European and US equity capital markets (ECM) and mergers and acquisitions (M&A) activities. These reports, which have yet to be confirmed by HSBC, suggest the bank will maintain its operations in the Middle East and Asia.

According to the analyst, this strategic shift is expected to have a minimal impact on HSBC’s overall revenue, contributing just 0.3% to the group’s total. The areas marked for exit are believed to be loss-making, which implies that their discontinuation could be financially beneficial for the bank. The analyst’s note indicates that the debt capital markets (DCM) division of HSBC will not be affected by these changes.

The speculation over HSBC’s potential cost savings has been linked to a Bloomberg report, which hints at a possible $3 billion reduction in expenses due to the company’s reorganization. This anticipated announcement could coincide with the upcoming release of HSBC’s fourth-quarter results on February 19, 2025, which may reveal further details on the bank’s financial strategies and operational adjustments. With a P/E ratio of 8.47 and a dividend yield of 3.8%, InvestingPro subscribers can access over 30 additional key metrics and insights to evaluate HSBC’s investment potential ahead of earnings.

HSBC Holdings, which has not yet issued a statement regarding these media reports, is considered by Citi as one of the top picks within the European banking sector. The bank’s strategic decisions and their implications for future performance are closely monitored by investors seeking to gauge the potential impact on its profitability and market position. For a comprehensive analysis of HSBC’s valuation and growth prospects, investors can access the detailed Pro Research Report available exclusively on InvestingPro, which covers over 1,400 top stocks with expert insights and actionable intelligence.

In other recent news, HSBC Holdings Plc (LON:HSBA) has indicated significant changes in its operations. The company plans to scale down its investment banking activities in Europe, the UK, and the Americas, as part of an ongoing restructuring process. This decision, disclosed in an internal memo and reported by Bloomberg, will see the bank cease providing equity underwriting and advisory services in these regions, concentrating instead on its core operations in Asia and the Middle East.

Furthermore, HSBC’s plan to close its international payments application Zing could potentially lead to around 400 job losses. This move is seen as part of cost-cutting measures being implemented by CEO, Georges Elhedery.

On the leadership front, HSBC has appointed Lisa McGeough as the new President and CEO for the United States, starting from January 1, 2025. McGeough will manage all regional businesses and the expansion of the Corporate and Institutional Banking sector in North America. This appointment is significant as it marks a rare occurrence of a woman holding the CEO position for HSBC in the region.

These developments are part of HSBC’s ongoing efforts to streamline its operations and focus on growth. As these changes unfold, investors can look forward to observing how these strategic decisions impact the company’s future trajectory.

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