Investec expects "disappointing" Q4 results from HSBC, downgrades to 'hold'

27th Jan 2015 10:09

HSBC's share price was under pressure on Tuesday after broker Investec lowered its rating for the stock from 'add' to 'hold', saying that the bank's upcoming fourth-quarter results could disappoint.The broker said that a weak showing from the bank on 23 February will "trigger downgrades", as it lowered its target price for the shares from 650p to 630p."Despite our moderately constructive view, when a respected investor told us just before Christmas that HSBC would 'obviously' be the top performing UK bank in 2015, we were mildly incredulous. One month on, and despite a strong market rally, 'defensive' HSBC is indeed the top performer year-to-date," said Investec analyst Ian Gordon.The shares, ahead of Tuesday's downgrade, had risen by 3% since the start of the year compared with just a 1% gain for the wider banking sector."We remain very comfortable in relation to HSBC's capital strength and dividend-paying capability, but we expect FX and Fixed Income, Currencies and Commodities (FICC) headwinds to trigger a 'miss' in Q4 2014 and to dampen 2015/16 expectations," Gordon said.Investec expects a pre-tax profit of $3.9bn from HSBC for the fourth quarter of 2014, some 33% below the current Bloomberg consensus forecast of $5.8bn.Gordon said that the "ultra-bull" investment case at HSBC relies upon expectations of rising interest rates in the UK and US. However, for the UK in particular, the yield curve now suggests flat rates until August 2016, "which would be unhelpful [for the bank]".Investec recommended invites to switch into Barclays, Standard Chartered, Lloyds or TSB - all of which are rated as a 'buy'.HSBC was trading 0.9% lower at 621.5p by 10:43.