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Trading, Higher Rates to Aid HSBC's Q3 Earnings, IB to Hurt
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HSBC Holdings (HSBC - Free Report) is scheduled to announce third-quarter 2022 results on Oct 25.
The company’s second-quarter results reflected an increase in adjusted revenues and marginally lower adjusted expenses. Expected credit losses and other credit impairment charges were a net charge in the quarter against a release in the prior-year quarter.
Factors to Influence Q3 Results
Investment Banking (IB) Revenues: Deal-making came to a grinding halt in the third quarter, as raging inflation, the equity markets’ rout and fears of a recession dealt a blow to business sentiments globally. This is likely to have negatively impacted HSBC’s advisory revenues.
Likewise, IPOs and follow-up equity issuances dried up in the quarter, as equity markets turned extremely bearish. Also, bond issuances were soft. Thus, HSBC is not expected to have witnessed much growth in equity as well as debt underwriting fees. Growth in overall IB revenues is, thus, expected to have been muted in the quarter.
Trading Revenues: After witnessing a gradual normalization in the second half of 2021, trading activities turned around in the first half of this year, with the trend continuing in the third quarter.
The developments from the start of 2022, including Russia’s invasion of Ukraine and continued supply-chain disruptions, led to uncertainty among investors in the third quarter. Also, fears of a severe economic slowdown amid the ultra-aggressive stance of the central banks across the globe to control inflation drove client activity and trading volume in the quarter.
These factors led to heightened volatility in the equity markets and other asset classes, including commodities, bonds and foreign exchange. Thus, driven by the rise in volatility and client activity, HSBC’s trading business performance is expected to have been robust.
Interest Income: Lending activities continued at a decent pace in the to-be-reported quarter. Further, the central banks across the globe raised interest rates in the quarter to counter the raging inflation. Thus, supported by loan growth and higher rates, HSBC’s interest income is anticipated to have improved.
Expenses: Over the past several years, HSBC has been able to control expenses. However, overall costs are expected to remain high in the to-be-reported quarter, given the company’s focus on growing market share in the U.K. and China, as well as strengthening digital capabilities globally.
Earnings Whispers
According to our quantitative model, it cannot be conclusively predicted whether HSBC will be able to beat the Zacks Consensus Estimate this time around. This is because it does not have the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: HSBC has an Earnings ESP of 0.00%.
Zacks Rank: The company currently sports a Zacks Rank #1 (Strong Buy). While this increases the predictive power of ESP, we also need a positive ESP to be confident of an earnings beat.
A few finance stocks, which you may want to consider as these have the right combination of elements to post an earnings beat in their upcoming releases per our model, are Stock Yards Bancorp, Inc. (SYBT - Free Report) and Ares Management (ARES - Free Report) .
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Trading, Higher Rates to Aid HSBC's Q3 Earnings, IB to Hurt
HSBC Holdings (HSBC - Free Report) is scheduled to announce third-quarter 2022 results on Oct 25.
The company’s second-quarter results reflected an increase in adjusted revenues and marginally lower adjusted expenses. Expected credit losses and other credit impairment charges were a net charge in the quarter against a release in the prior-year quarter.
Factors to Influence Q3 Results
Investment Banking (IB) Revenues: Deal-making came to a grinding halt in the third quarter, as raging inflation, the equity markets’ rout and fears of a recession dealt a blow to business sentiments globally. This is likely to have negatively impacted HSBC’s advisory revenues.
Likewise, IPOs and follow-up equity issuances dried up in the quarter, as equity markets turned extremely bearish. Also, bond issuances were soft. Thus, HSBC is not expected to have witnessed much growth in equity as well as debt underwriting fees. Growth in overall IB revenues is, thus, expected to have been muted in the quarter.
Trading Revenues: After witnessing a gradual normalization in the second half of 2021, trading activities turned around in the first half of this year, with the trend continuing in the third quarter.
The developments from the start of 2022, including Russia’s invasion of Ukraine and continued supply-chain disruptions, led to uncertainty among investors in the third quarter. Also, fears of a severe economic slowdown amid the ultra-aggressive stance of the central banks across the globe to control inflation drove client activity and trading volume in the quarter.
These factors led to heightened volatility in the equity markets and other asset classes, including commodities, bonds and foreign exchange. Thus, driven by the rise in volatility and client activity, HSBC’s trading business performance is expected to have been robust.
Interest Income: Lending activities continued at a decent pace in the to-be-reported quarter. Further, the central banks across the globe raised interest rates in the quarter to counter the raging inflation. Thus, supported by loan growth and higher rates, HSBC’s interest income is anticipated to have improved.
Expenses: Over the past several years, HSBC has been able to control expenses. However, overall costs are expected to remain high in the to-be-reported quarter, given the company’s focus on growing market share in the U.K. and China, as well as strengthening digital capabilities globally.
Earnings Whispers
According to our quantitative model, it cannot be conclusively predicted whether HSBC will be able to beat the Zacks Consensus Estimate this time around. This is because it does not have the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: HSBC has an Earnings ESP of 0.00%.
Zacks Rank: The company currently sports a Zacks Rank #1 (Strong Buy). While this increases the predictive power of ESP, we also need a positive ESP to be confident of an earnings beat.
HSBC Holdings plc Price and Consensus
HSBC Holdings plc price-consensus-chart | HSBC Holdings plc Quote
Finance Stocks That Warrant a Look
A few finance stocks, which you may want to consider as these have the right combination of elements to post an earnings beat in their upcoming releases per our model, are Stock Yards Bancorp, Inc. (SYBT - Free Report) and Ares Management (ARES - Free Report) .
The Earnings ESP for Stock Yards Bancorp is +2.15%. SYBT sports a Zacks Rank #1 at present. The company is expected to report results on Oct 26. You can see the complete list of today’s Zacks #1 Rank stocks here.
Ares Management is scheduled to release quarterly results on Oct 27. ARES currently has a Zacks Rank #3 and an Earnings ESP of +5.04%.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.