Canaccord cuts target price on HSBC to 750p

24th Feb 2014 11:42

HSBC´s management made good progress in 'right-sizing' the lender´s operations given the current capital regime and the bank continued to be well-capitalised under the new basel framework for regulatory capital, Canaccord Genuity explained to clients in a note on Monday.Nonetheless, the broker cut its fiscal year 2014 earnings per share estimate by 18% due to lower forecasts for revenues. Revenue might also continue to be under pressure due to volatility in emerging markets. In particular, the analysts highlighted the still elevated cost/income ratio to be seen in Europe, which stood at 84% at the end of 2013. It came as net interest income slipped 9% over the year, dragged down by low interest rates and the current macroeconomic landscape. The bank's quarterly dividend, at 18 cents, made for an increase of 28% versus the fourth quarter of 2012, but was nevertheless below Canaccord's higher than consensus expectations. As a result of all the above they retained their 'buy' recommendation on the shares, but reduced their target price to 750p from 825p previously. The target price was derived via the return-on-equity (ROE) versus price-to-book-value (PBV) approach. The cut was led by slower growth in net asset values (NAV) given their rebased estimates. AB