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HSBC's Revenue Woes Linger, Cost Containment On Track

By Zacks Investment ResearchStock MarketsSep 04, 2016 11:38PM ET
www.investing.com/analysis/hsbc's-revenue-woes-linger,-cost-containment-on-track-200151839
HSBC's Revenue Woes Linger, Cost Containment On Track
By Zacks Investment Research   |  Sep 04, 2016 11:38PM ET
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On Sep 5, 2016, we issued an updated research report on HSBC Holdings (LON:HSBA) (NYSE:HSBC) . We believe the company’s consistent focus on expense management will enhance its financial stability in the near future. Also, its steady capital deployment activities will keep attracting investors. However, strained top-line growth, mounting litigation charges and stringent regulatory restrictions remain its near-term headwinds.

Revenue generation remains a major concern at HSBC. A lower yield curve and global economic concerns along with the Brexit storm are expected to weigh on the core business drivers, thereby challenging top-line growth. HSBC dropped its target of surpassing 10% return on equity by 2017 due to the current global growth concerns.

Further, with relatively high inflation and wage pressures in some key emerging markets, HSBC’s business growth remains challenging. Stringent regulatory reforms, feeble loan demand and elevated legal costs may further hurt HSBC’s profitability in the near term.

With the help of its cost-cutting programs, HSBC experienced a decline in operating expenses in the first half of 2016. The company consistently undertakes cost-cutting initiatives to mitigate top-line pressure and improve operating efficiency.

In Jun 2015, HSBC initiated a cost-cutting program that includes global job cuts and divestiture of non-core operations. The target of this program is to lower expenses by $4.5–$5 billion by the end of 2017.

Moreover, HSBC’s steady capital deployment activities indicate its capital strength. In Aug 2016, HSBC initiated the repurchase of $2.5 billion common shares (following the completion of sale of Brazilian unit). Further, the company plans to keep its payout ratio intact at the 40–60% range.

Notably, over the past six months, HSBC’s stock gained around 20% on the NYSE.


Over the past 30 days, the Zacks Consensus Estimate remained unchanged at $3.04 per share and $3.10 per share for 2016 and 2017, respectively.

Currently, HSBC Holdings plc carries a Zacks Rank #3 (Hold).

Stocks to Consider

Some better-ranked stocks in the same space are Grupo Financiero Galicia S.A. (NASDAQ:GGAL) , Banco Macro S.A. (NYSE:BMA) and Westpac Banking Corporation (NYSE:WBK) , each sporting a Zacks Rank #1 (Strong Buy).

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GRUPO GALIC ADR (GGAL): Free Stock Analysis Report

WESTPAC BK ADR (WBK): Free Stock Analysis Report

BANCO MACRO-ADR (BMA): Free Stock Analysis Report

HSBC HOLDINGS (HSBC): Free Stock Analysis Report

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Zacks Investment Research
HSBC's Revenue Woes Linger, Cost Containment On Track
 

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HSBC's Revenue Woes Linger, Cost Containment On Track

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