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Analyst Blog

On Aug 20, 2014, we issued an updated research report on HSBC Holdings plc (HSBC - Analyst Report). The company reported disappointing first-half 2014 results owing to fall in revenues. However, we believe that the company’s cost-savings initiatives will continue to bear fruit, supporting its bottom line.

Given the low interest rate environment, HSBC’s top-line growth is expected to remain sluggish. In the first half itself, revenues declined 7% year over year. Additionally, a fall in loan demand, lower trading income due to lesser client activity and a reduced contribution from balance sheet management will likely continue to weigh on overall revenue growth of the company going forward.

Further, given the dismal first-half results, the Zacks Consensus Estimate depicted mixed response over the last 60 days. The Zacks Consensus Estimate for 2014 increased by a penny to $4.34 per share, while for 2015 it remained stable at $4.64 per share.

However, on the flip side, HSBC had announced the second round of its cost-cutting program in May 2013, primarily aimed at focusing on high-growth markets and improving efficiency. The program targets to save an additional $2–$3 billion by 2016. The company, while investing in core enterprises through expansion in markets with growth potential, has been divesting businesses in less profitable regions.

HSBC currently has a Zacks Rank #4 (Sell).

Stocks That Warrant a Look

Some better-ranked foreign banks include KB Financial Group, Inc. (KB), Shinhan Financial Group Company Ltd. (SHG) and Itau Unibanco Holding S.A. (ITUB - Analyst Report). While KB Financial and Shinhan Financial sport a Zacks Rank #1 (Strong Buy), Itau Unibanco Holding holds a Zacks Rank #2 (Buy).

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