BofA Merrill Lynch expects a recession in Hong Kong in 2H. Tourist arrivals typically take time to recover from dislocation, even when the underlying events are over.
However, the research house said higher HIBOR is a powerful offset and with a retail loan to deposit ratio of only 34%, BofAML sees HSBC Holdings' (00005) earnings resilient.
Apart from press reports of a sale of French retail, which BofAML said logical; it also expects US retail to be up for disposal. Following the US$0.7bn severance charge announced, BofAML sees a further narrowing of ambition at Global Banking & Markets over 2020. And it sees a potential 10% cut in Headquarters. Collectively these could take 9% out of costs, for only a 4% revenue hit.
BofAML reiterated its "neutral" rating on HSBC, with a target price of HK$59.75.
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