HSBC; a strong Q3
We are encouraged on a number of points in HSBC Q3:-
HSBC (PBT) | Q3 2015 | Q3 2014 | Difference (Δ) | COMMENT |
Retail Banking | 1,160 | 1,303 | -143 | 10% drop in net interest income |
Commercial Banking | 2,226 | 2,295 | -69 | Similar performance |
Global Banking /Markets | 2,141 | 941 | +1200 | Trading +24%, expense-$1.1bn |
Private Bank | 81 | 190 | -109 | 15% drop in net interest income |
Other Business | 489 | -120 | +609 | One off items |
“Significant”expense items | -456 | -1702 | +1,246 | Both PPI/ legal expense drop |
Source; HSBC plc
EPS of 25 cents (9 months: 73 cents) leave HSBC on track to beat FY15 consensus forecasts of 52.88p (80 cents), the FY15 should be c 10 cents above consensus.
The board has flagged the potential for slippage in the time table for a decision on the domicile to the 2015 final results (due 23 Feb 2016). The UK press reported the board is considering a move to the USA as a credible alternative to Hong Kong. A move of the domicile would increase the possibility of a UK retail demerger, possibly ahead of the retail ring fencing rules by 2019. It would also mean a move of the primary listing due to FTSE Listing Rules for the parent co.
CONCLUSION
HSBC has been treated harshly in 2015 partly due to concerns over China/ HK lending but also ahead of the domicile decision. On fundamentals the stock is inexpensive on a forward multiple of just 9.5x and yield of 6.8% (net assets c.598p).