HSBC a 'hold' ahead of annual results, says Deutsche Bank

19th Feb 2014 10:50

Deutsche Bank has reiterated its 'hold' recommendation for banking giant HSBC ahead of its annual results next Monday, saying that these figures are 'much more important than usual'."We think this release takes on additional importance given the significant leg-down seen in HSBC's price-to-earnings ratio relative to the European bank universe and the substantial and imminent return of cash to Vodafone shareholders following the Verizon deal," said Deutsche Bank analysts Jason Napier and David Lock.According to reports on Wednesday, high-yielding UK equities such as HSBC could benefit following the £51bn sale of Vodafone's 45% stake in Verizon Wireless, with £14.6bn of the proceeds coming in cash.Napier and Lock said that HSBC is now trading at a 7% discount on price-to-earnings terms to peers in the European banking sector. This is a "crisis-low", they said. "We think some evidence of revenue momentum and capital accretion may be met with a surprisingly robust increase in investor interest, particularly given the imminent receipt of substantial volumes of cash by Vodafone shareholders."Deutsche Bank expects HSBC to report a pre-tax profit of $24bn for 2013, slightly below the consensus forecast of $25bn.The target price for the stock has been reduced slightly from 710p to 700p to reflect recent changes in the dollar-sterling exchange rate."We retain a 'hold' recommendation pending more information on revenue and capital momentum with results."The stock was up 0.3% at 658.04p by 11:18 on Wednesday.BC