Citigroup: HSBC Holdings' Adjusted Pretax Profit Exceeds Expectations Last Quarter, Target Upgrade Expected to Drive Positive Re-rating

Stock News
Yesterday

Citigroup has issued a research report maintaining a "Buy" rating on HSBC Holdings (00005) with a target price of HK$143.3. HSBC's fourth-quarter underlying pretax profit, excluding significant items, for the 2025 fiscal year reached $8.6 billion, surpassing market consensus by 9%. Revenue exceeded expectations by 3%, costs were in line with forecasts, and impairment losses were 12% better than anticipated. The revenue outperformance was primarily driven by net interest income from the banking business, which was 6% above expectations, while non-interest income was broadly in line, coming in 1% lower. Due to lower-than-previously-guided losses from the sale of the French mortgage portfolio, reported pretax profit stood at $7.8 billion, significantly exceeding market consensus by 18%. The Common Equity Tier 1 ratio was 14.9%, increasing by 40 basis points quarter-on-quarter and surpassing consensus by 20 basis points, even after accounting for a dividend of $0.45 per share, which was 7% higher than consensus. On a pro forma basis following the privatization of Hang Seng Bank, the ratio would decrease to 13.8%. The group has provided guidance indicating that the transaction is expected to deliver $500 million in incremental synergies, whereas Citigroup believes market consensus assumes minimal synergies. The group has raised its targets, now expecting a return on tangible equity of 17% or higher for the 2026 to 2028 fiscal years, compared to a market consensus range of 16.6% to 17%. Overall, this represents a strong earnings report, with reassuring strategic updates, useful new information regarding Hang Seng Bank, and raised targets that are expected to drive a positive re-rating.

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Most Discussed

  1. 1
     
     
     
     
  2. 2
     
     
     
     
  3. 3
     
     
     
     
  4. 4
     
     
     
     
  5. 5
     
     
     
     
  6. 6
     
     
     
     
  7. 7
     
     
     
     
  8. 8
     
     
     
     
  9. 9
     
     
     
     
  10. 10