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HSBC Q4 Earnings: What's in Store for the Stock this Time?

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London-based global bank, HSBC Holdings plc (HSBC - Free Report) is scheduled to announce fourth-quarter and 2016 results on Feb 21, before the market opens.

Last quarter, this major foreign bank reported a loss owing to the continued revenue slump and a tough operating backdrop.

Despite the dismal performance and continued macroeconomic concerns, HSBC’s shares were up nearly 7% on the NYSE for the three months ended Dec 31, 2016. This reflects a gradually improving macro-economic situation.

So, what to expect from HSBC results this earnings season?  Let's see what factors might have affected the earnings in the fourth quarter.

Factors to Influence Results

HSBC should continue witnessing a slump in advisory revenues in the quarter, given the significant slowdown in M&As and weakness in IPO markets. However, trading income should rise, driven by improvement in fixed income and equity trading.

Further, Hong Kong Interbank Offered Rate (HIBOR) has been gradually increasing over the past few months. As Asia comprise nearly 40% of HSBC’s total revenue, the rise in HIBOR will support its interest income to some extent. Nonetheless, a persistent low interest rate environment across several major economies should continue hampering interest income growth.

Additionally, loan impairment charges and other credit risk provisions are expected to trend upward as continued global slowdown may lead to deterioration in asset quality.

HSBC continues to focus on its core operations while divesting or closing the less profitable ones. This is consistently leading to improvement in efficiency ratio. Also, supported by these and other restructuring initiatives, operating expenses should witness a downward trend. Nonetheless, increased risk, compliance and related costs are likely to somewhat mitigate this downtrend.

HSBC currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Among the foreign banks, Barclays PLC (BCS - Free Report) and Canadian Imperial Bank of Commerce (CM - Free Report) are scheduled to announce results on Feb 23, while The Royal Bank of Scotland Group plc will report on Feb 24.

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