Investec downgrades HSBC, sees better value elsewhere

3rd Apr 2014 10:00

Investec has downgraded global banking giant HSBC from 'buy' to 'hold', saying that investors should seek 'better value elsewhere' in the sector after the stock's recent outperformance."Curiously, HSBC outperformed the UK bank sector in the first quarter of 2014. Although its valuation metrics may not appear unduly challenging, it still faces multiple headwinds," said Analyst Ian Gordon.He said that the impact of extended capital build over the medium term and the likely "de-recognition" of earnings from Bank of Communications (BoCom) - due to accounting issues surrounding its 19% stake in the Chinese lender - will push out the delivery of HSBC's 12% return on equity target to 2018."Near-term, it is weak balance sheet growth, weak revenues and only mild cost containment that drive sub-target results," Gordon added.The broker has cut its target price for HSBC's stock from 745p to 640p, saying that it prefers Barclays and Standard Chartered, both of which are rated 'buy'.HSBC was trading 0.3% higher at 612.9p by 10:21 on Thursday.BC