HSBC share price: Investec no longer bullish on lender

on Jun 3, 2016
Updated: Oct 21, 2019

Analysts at Investec are no longer bullish on HSBC Holdings (LON:HSBA), arguing that their expectations for the lender’s dividend are insufficient to sustain a ‘buy’ rating. The broker, however, flagged several potential profit-taking opportunities this month.

HSBC’s share price, however, has been steady in today’s session, having added 1.66 percent to 453.55p as of 10:30 BST, and outperforming the benchmark FTSE 100 index which is currently 0.75 percent better off at 6,232.19 points. The lender’s shares have lost more than 27 percent of their value over the past year, and are down by some 15 percent in the year-to-date.
Investec trimmed its rating on HSBC from ‘buy’ to ‘hold’ today, pointing to just under one percent residual upside to its unchanged price target on the stock of 450p.

“Our continuing belief that HSBC can, should and will maintain an (uncovered) 51c dividend, an implied 2016e dividend yield of 7.9 percent is, by itself, insufficient to sustain a ‘buy’ recommendation,” the analysts were quoted as saying.
Investec further said that the current month could offer several potentially positive catalysts which could generate profit-taking opportunities, namely the Brazil disposal, the Federal Reserve’s interest rate decision, as well as the upcoming referendum on the UK’s membership in the European Union. The analysts, however, cautioned that the twin challenges of an ongoing drop in net interest margin and declining customer loans made HSBC’s 10-percent return on equity target unrealistic.
Investec’s comments come after analysts at JPMorgan Chase & Co slashed their rating on Europe’s biggest bank to ‘underweight’ earlier this week, and trimmed their price target on the stock from 580p to 200p. Goldman Sachs meanwhile remains ‘neutral’ on HSBC, valuing the shares at 595p.
As of 10:57 BST, Friday, 03 June, HSBC Holdings plc share price is 453.40p.