HSBC Holdings plcHSBC is scheduled to announce fourth-quarter and 2017 results on Feb 20, before the market opens. Its quarterly earnings and revenues are projected to improve year over year.
Last quarter, results benefited from higher revenues and a fall in loan impairment charges. However, operating expenses increased marginally.
Activities of the company in the fourth quarter failed to win analysts' confidence. As a result, the Zacks Consensus Estimate for earnings of 60 cents remained stable over the last seven days. Nevertheless, the figure reflects significant improvement on a year-over-year basis.
The Zacks Consensus Estimate for sales is $12.8 billion for the to-be-reported quarter. The top line is expected to witness a jump of 42.5%.
Looking at the price performance, HSBC stock gained 28.5% in 2017, outperforming the 22.4% rally of its industry .
So, what to expect from HSBC this earnings season? Let's see check out the factors might have affected the earnings in the quarter.
Factors to Influence Q4 Results
Investment banking to modestly support revenues: Driven by improving market conditions and chances of continued rise in interest rates in the future, the quarter witnessed an increase in debt issuance. Further, the quarter is likely to record a slight improvement in equity issuance despite seasonality. Strong rally in the equity markets worldwide might have propelled IPOs and follow-on offerings. So, both debt and equity underwriting fees for HSBC are projected to rise in the to-be-reported quarter.
Further, with the overall improvement in the global M&A scenario, HSBC is expected to generate decent advisory fees.
Rise in loan demand to support interest income: While a low interest rate environment across several major economies continue hampering interest income growth, increase in loan demand is likely to offset it to some extent. So, HSBC is expected to report a modest improvement in interest income.
Costs to remain manageable: HSBC has been restructuring its operations. These efforts are expected improve the bank's operating efficiency and trim costs. However, legal and other regulatory expenses are bound to adversely affect its bottom line.
Trading income to decline due to lack of volatility: The quarter continued to witness low volatility in both bond and equity markets and thus trading activities remained sluggish. Also, the fall in trading revenues will primarily be due to comparison with the prior-year quarter that witnessed higher volatility following the U.S. Presidential election results. Therefore, HSBC will likely report dismal trading revenues.
Now, let's check what our quantitative model predicts.
According to our quantitative model, it cannot be conclusively predicted if HSBC will be able to beat the Zacks Consensus Estimate this time. This is because it does not have the right combination of the two key ingredients - a positive Earnings ESP and a Zacks Rank #3 (Hold) or better - for increasing the odds of an earnings beat.
You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .
Zacks ESP: The Earnings ESP for HSBC is 0.00%.
Zacks Rank: HSBC has a Zacks Rank #3, which increases the predictive power of ESP. However, we also need a positive ESP to be confident of an earnings beat.
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