[ET Net News Agency, 23 February 2021] Morgan Stanley said HSBC Holdings' (00005)
earnings beat the research house's estimate. The new RoTE (return on tangible equity)
target of at least 10% is below the original 10-12% target, but hardly a surprise, given
the lower rate environment.
The research house said HSBC has widened the scope of cost savings compared to its 2020
update, with costs ex-banking levy expected to be below US$30bn (average 2020 FX; below
US$31bn average December 2020 FX) and cost savings of US$5-5.5bn (+US$1bn cost savings).
This compares with Morgan's estimate of US$29.6bn costs in 2022 and US$5.8bn savings.
Morgan maintained its "equal-weight" rating, with an unchanged target price of HK$43.
It believes the cost takeout plans to be realistic and achievable, and the prospect of
higher future capital distributions is encouraging. Morgan thinks the market has already
anticipated RoTE progression improvement into 2022, a function of cyclical improvement
from 2021 and progress on cost and balance sheet strategy in 2020, and the key to the
further upside will be net revenue execution which will take time to deliver. (KL)