Analysts Upgrade HSBC on Back of Sterling Slump

Following the Brexit vote, there are several fairly immediate considerations for banks and analysts think that HSBC will also be hit by slowing growth in emerging markets

Stephen Ellis 13 July, 2016 | 1:07PM
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As we update our exchange rate, we are increasing our fair value estimate to £6.10 from £5.60. We expect HSBC's revenue to fall 8% in 2016 and to grow at a compound annual rate of 4% in the medium term on growth in Asia and Latin America and the improvement of the interest rate environment.

While the impact of Brexit is far reaching, we do see an undervalued opportunity with HSBC

We think that falling commodity prices and slowing growth in emerging markets will mean a rise in credit costs in 2016 and we are penciling in $1.5 billion of additional regulatory fines. Using these assumptions, we estimate a fair value of $8 per common share for HSBC, which reports in U.S. dollars. We use an exchange rate of $1.31 per £1 as of July 12.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
HSBC Holdings PLC440.00 GBP0.00Rating

About Author

Stephen Ellis  Stephen Ellis is a senior stock analyst on the Energy Team.

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