Goldman cuts forecasts for HSBC, removes from 'conviction buy' list

7th Mar 2014 09:14

Goldman Sachs has removed HSBC from its 'conviction buy' list and reduced its profit forecasts following the bank's 2013 results last week.Goldman maintained a 'buy' recommendation for the stock, but lowered its target price to 740p from 900p.HSBC said on February 24th that underlying profit before tax (PBT) rose 41% last year to $21.59bn on underlying revenues that increased 3% to $63.30bn, though both figures came in below consensus estimates.The company reported "weak operating trends" in the fourth quarter due to lower Global Banking & Markets revenues and weaker growth in Asia (excluding Hong Kong) and Latin America, "which we attribute to the recent macro trends and currency weakness", Goldman said.Meanwhile, analysts highlighted accounting changes with regard to HSBC's stake in Chinese lender Bank of Communications (BoCom) and uncertainties surrounding regulatory adjustments to capital requirements.These has prompted Goldman to lower its PBT estimates for 2014 to 2017 by around 7-9% and drop its earnings per share (EPS) forecasts for that period by 10-19%. The larger cut for estimated EPS reflects a higher anticipated share count, given that Goldman no longer forecasts near-term share buybacks at the bank."With regard to capital, uncertainties remain on what the final regulatory requirements for HSBC will be. In our view this is likely to push additional capital returns further into the future; capital build-up (rather than capital return) will pressure returns."HSBC's share price was down 0.5% at 622.5p by 10:13 on Friday.BC