Broker snap: Investec lists reasons to 'switch out of HSBC'

24th Aug 2012 11:20

Investec has retained it 'hold' recommendation and 590p target price for global banking giant HSBC, highlighting the recent rating outlook change by Standard and Poor's and settlement rumours in the US.S&P has downgraded its outlook for HSBC from 'stable' to 'negative' as the bank continues to be hampered by a money-laundering probe.Investec analyst Ian Gordon said: "We regard this as somewhat backward looking, and in any event, CEO Stuart Gulliver is already targeting the removal of much of the group's inherent 'structural complexity' which has arguably contributed to sub-optimal capital allocation decisions for decades, as well as a number of compliance failings. So this is old news."Meanwhile, media reports have suggested the HSBC is in settlement talks with US regulatory regarding the allegedly laundered funds of sanctioned nations. The fine is expected to be $700m, in line with the provision taken in the first half, but Investec reckons that it will be closer to $1bn."Whereas we acknowledge that neither of these developments are helpful, there really are much better reasons to switch out of HSBC - for example, our expectation of a US$1.1bn (6%) 'miss' against inflated consensus expectations for H2 2012e, or the still compelling investment opportunities offered by resurgent STAN and BARC," Gordon said.By 11:19 on Friday, shares were down 0.89% at 554.1p.BC