[ET Net News Agency, 11 August 2020] Morgan Stanley lowered its target price for HSBC
Holdings (00005) to HK$36 from HK$42 but upgraded its rating to "equal-weight" from
"underweight".
The research house said HSBC's NIM (net interest margin) pressures have intensified as
its key rates have moved closer to zero. In addition, Morgan expects renewed pressure on
non-interest income due to both a lower level of economic activity and a strong 1H GB&M
income normalises. The offsets to this should be better cost control as some pre-COVID
costs are permanently reduced, and as management focuses more on cost management.
Morgan has raised credit charges for 2020 following a stronger-than-forecast 1H charge,
but leave subsequent years unchanged.
It assumed that HSBC sees RoTE (return on tangible equity) fall to 4% in 2020 then
recover to 6.2% in 2021 and 8.5% in 2022. However, economic uncertainties mean there are
still risks to this forecast.
Morgan sees economic and geopolitical uncertainties, the absence of capital returns for
the remainder of this year, plus persistently low rates capping upside on the stock for
now. It, therefore, expects HSBC stock to continue to trade between its base/bear case
values of HK$39/HK$26. (KL)