Skip to content
Alpha Edge Investing

Alpha Edge Investing

"Investors operate with limited funds and limited intelligence, they don’t need to know everything. As long as they understand better than others, they have an edge.” – George Soros

  • Home
  • Earnings Updates/ Corporate Actions
  • Research – Equities
  • Research – Fixed Income/ Bonds
  • Research – Unit Trust/ ETF
  • News
  • My Opinions/ Views
  • Others
  • About Me
  • Contact
  • Disclaimer
  • Community and Support Forums
  • Toggle search form

DBS: HSBC Holdings PLC – Buy Target Price HK$63.90

Posted on October 5, 2022October 5, 2022 By alanyeo No Comments on DBS: HSBC Holdings PLC – Buy Target Price HK$63.90
<News Alert> HSBC (5 HK) weak GBP impact largely in price while short-term volatility may maintain

What’s new 

  • GBP/USD falls to historical low after the tax cut plan and has falls by 11% in 3Q and c.20% YTD to 1.0889.
  • Share price of HSBC/Standard Chartered falls 10% or more this week.

Our view:

  • In FY21, HSBC generated c.25% of its PBT from UK. It had c.25% of loan and 27% of deposit balance in GBP by the end of FY21.
  • At 31 Dec 2021, HSBC had net investment hedges of USD 25.9bn, of which USD 15.7bn is related to GBP. HSBC had c.USD 32.2bn of structural foreign exchange exposure in GBP by the end of FY21.
  • Shareholders equity would decrease by c.USD 3bn if euro and sterling FX rates weakened by 5% relative to the USD, as disclosed in their FY21 annual report, or c.1.7% of its equity book value.
  • Impact on PnL: If GBP/USD falls by 5%, it will have c.USD 430m of impact on revenue and c.USD 260m of impact on costs if we use FY21 HSBC UK financial number as the estimation baseline. The total impact would be c.USD 240m on PBT, or 1.3% of total FY21 PBT.
  • Impact on Capital position: if euro and sterling FX rates falls by 5%, RWA will go down by USD 12.9bn from 1H22’s level and CET 1 ratio will go down by 15bps from 1H22’s level of 13.6%.
  • The share price is now trading at 0.5x FY23F P/B, or >1SD below its 5-yr average. We see the negatives from GBP depreciation is largely in price now while short-term volatility is likely to maintain with higher US recession risk. Still, we expect China/HK economic recovery in FY23F and Asia contributed over 60% of PBT in FY21.
  • We currently have BUY with TP of HKD 63.9

Share this:

  • Click to share on Twitter (Opens in new window)
  • Click to share on Facebook (Opens in new window)
  • Click to share on LinkedIn (Opens in new window)
  • Click to share on Telegram (Opens in new window)
  • Click to share on WhatsApp (Opens in new window)
Research - Equities Tags:HSBC

Post navigation

Previous Post: DBS: Singapore Residential – City Developments, Ho Bee Land, UOL
Next Post: DBS: China Real Estate

Related Posts

Hong Kong’s Rate Hikes to Drive Down Costly Housing Prices News
HSBC could unlock US$26.5 billion in Asia spin-off, report says Earnings Updates/ Corporate Actions
DBS: HSBC Holdings PLC – BUY TP HK$62.40 Research - Equities
OIR: HK strategy – Riding on the rate hike cycle Research - Equities
OIR: Market Pulse – SIA Engineering, Wuxi Apptec, HSBC, Developed Market Banks Research - Equities
OIR: China Strategy – ADR delisting risk should be manageable; watch out for policy tone at the CEWC Research - Equities
OIR: Market Pulse – CICT, HSBC Research - Equities
BB: HSBC’s CEO Paints Bullish Outlook After Profit Beats Estimates News
SCMP: HSBC, Standard Chartered, Bank of China (HK) among 19 lenders approved to sell Wealth Management Connect products News
OIR: Market Pulse – SPH, HK Strategy, Sun Hung Kai Properties, Henderson Land, HSBC Research - Equities
OIR: China strategy – Regulatory guidance transitioning to the mid-phase Research - Equities
DBS: China Financial Sector Research - Equities

Leave a Reply

You must be logged in to post a comment.

Login

Log In
Register Lost Password
Get new posts by email
Chat on WhatsApp
  • Earnings Updates/ Corporate Actions
  • My Opinions/ Views
  • News
  • Others
  • Research – Equities
  • Research – Fixed Income/ Bonds
  • Research – Unit Trusts/ ETF

Copyright © 2023 Alpha Edge Investing.

Powered by PressBook Grid Blogs theme