HSBC at fair value after H1 profit fall, says Shore Capital

4th Aug 2014 13:17

Shore Capital has repeated its 'hold' recommendation for HSBC, saying that the stock is fully valued after its slightly worse-than-expected interim report.The bank reported a 12% fall in profit before tax (PBT) in the first half to $12.340bn, around 1% short of the consensus forecast of $12.549bn.Shore labelled this as just a "small headline miss" owing to regulation and compliance costs. Looking at the details, underlying adjusted PBT increased by 3% to $13.262bn, on the back of flat revenue, a 4% increase in costs and a 38% drop in impairments."Negative cost/income jaws have been a key feature of HSBC's results in recent periods and remain an area of concern to us," Shore said.The broker highlighted cautious words from the company on the current regulatory environment but also noted "some more positive commentary" in the outlook surrounding the economic backdrop and the prospect of benefiting from a rise in US interest rates.However, the broker said that the shares are trading at 12.1 times earnings and 1.3 times tangible net asset value with a dividend yield of 4.9% - "We view these metrics as being fair and reiterate out neutral stance".HSBC was trading 1.7% higher at 640.1p by 13:23.BC