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Analyst Blog

On Jun 24, 2014, we issued an updated research report on HSBC Holdings plc (HSBC - Analyst Report). Although the company’s first-quarter 2014 results were disappointing, it was partially offset by lower operating expenses driven by the success of cost-savings initiatives.

HSBC had announced the second round of its cost-cutting program in May 2013 with a target to save an additional $2–$3 billion by 2016. The second round of the program foregrounded the primary strategy to focus on core operations in fast-growing and profitable markets. The company has lately been divesting businesses in less profitable regions, while investing in core enterprises through expansion in markets with growth potential.

Moreover, with a sound balance sheet and capital position, HSBC definitely poses a competitive advantage over other foreign banks. Also, backed by its strong liquidity position, HSBC has been consistently paying dividends.

Nevertheless, given the low interest rate environment, HSBC’s top-line growth is expected to remain sluggish. In the first quarter itself, revenues declined 8% year over year.

Given the dismal first-quarter results, the Zacks Consensus Estimate depicted mixed response over the last 60 days. The Zacks Consensus Estimate for 2014 decreased 1.9% to $4.57 per share, while for 2015 it increased 7.2% to $4.90 per share.

HSBC currently has a Zacks Rank #3 (Hold).

Stocks That Warrant a Look

Some better-ranked foreign banks include BBVA Banco Franc (BFR - Snapshot Report), Banco Bradesco S.A. (BBD - Snapshot Report) and The Royal Bank of Scotland Group plc (RBS - Snapshot Report). All these stocks sport a Zacks Rank #1 (Strong Buy).

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