On Dec 24, 2013, we reiterated our long-term recommendation on
HSBC Holdings plc
) at Neutral. This was based on the company's strong
third-quarter results. However, slow revenue growth in its mature
markets and a still weak European economy remain causes of
On Nov 4, HSBC announced impressive third-quarter results.
Top-line growth and lower operating expenses were the primary
reasons for the strong results. However, weak performance across
all businesses, except for Retail Banking and Wealth Management,
acted as a headwind.
With its sole focus on fast-growing and profitable markets, in
May 2013, HSBC announced the second leg of its cost-cutting
program with the aim of saving $3 billion by 2016. Additionally,
the company remains strong with respect to its balance sheet and
capital position. We expect this capital strength to enable
HSBC's expansion of market share and consistently pay dividends.
However, revenue growth at HSBC is expected to remain sluggish in
the subsequent quarters, as the low interest rate environment
will continue to hamper revenue generation. Further, though the
company is striving with its cost rationalization efforts, rising
wage inflation and strategic investments will not allow it to
make the cost line favorable any time soon.
Moreover, the Zacks Consensus Estimate for 2013 declined 1.7% to
$4.72 per share over the last 60 days. Similarly for 2014, the
Zacks Consensus Estimate fell 2.5% to $5.05 per share, over the
same time-frame. Hence, HSBC now has a Zacks Rank #4 (Sell).
Other Foreign Banks Worth Considering
Some better-ranked foreign banks include
Grupo Financiero Galicia S.A.
BBVA Banco Franc
ICICI Bank Ltd.
). While Grupo Financiero carries a Zacks Rank #1 (Storng Buy),
BBVA Banco Franc and ICICI Bank have a Zacks Rank #2 (Buy).
BANCO FRANC-ADR (BFR): Free Stock Analysis
GRUPO GALIC ADR (GGAL): Free Stock Analysis
HSBC HOLDINGS (HSBC): Free Stock Analysis
ICICI BANK LTD (IBN): Free Stock Analysis
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