HSBC share price: Berenberg remains bullish on lender

HSBC Holdings (LON:HSBA) is undervalued at its current levels, analysts at Berenberg have said, retaining their ‘buy’ recommendation on the stock. The broker further argues that the FTSE 100 group’s dividend is sustainable.

HSBC’s share price has been steady in early trading today, having added 0.59 percent to 431.35p as of 08:01 BST. The advance is largely in line with gains in the broader London market, with the blue-chip FTSE 100 index standing 0.49 percent higher at 6,181.47 points.
Analysts at Berenberg reiterated their ‘buy’ recommendation on HSBC yesterday, with a price target of 600p on the stock, noting that the group was starting to show it is in control of its cost base and is undervalued at the current price.

“Two quarters do not make a whole but HSBC is beginning to demonstrate control of its cost base and should be able to deliver on its 2017 cost promise,” the broker’s analyst James Chappell said, as quoted by Citywire. “Alongside this, management remains as risk-focused as ever, which means the dividend is sustainable, in our view.”
The analyst further noted that cutting the dividend made no sense for the Asia-focused lender and that it should return capital to shareholders.
“HSBC remains risk disciplined so seems unlikely to waste the capital just to satisfy the market and boost revenues in the short term,” Chappell pointed out, adding that returning capital to investors was “the best thing for HSBC to do”.
The comments are a boost for HSBC which updated investors on its first-quarter performance earlier this month, posting a dip in profits following the market volatility seen earlier this year. The bank, however, maintained its dividend at $0.10.
JPMorgan Chase & Co, however, remains bearish on HSBC, reiterating its ‘underweight’ stance on the company last week, valuing the stock at 400p. Independent Research, which has a ‘neutral’ rating on the blue-chip bank, meanwhile set a price target of 400p on the stock.
As of 08:08 BST, Tuesday, 17 May, HSBC Holdings plc share price is 428.80p.