Bernstein downgrades HSBC to market perform from outperform

Bernstein downgraded HSBC to 'market perform' from 'outperform' and cut its target price to 650p from 660p.

It noted that since the beginning of the year, HSBC has struggled with its top line performance, with muted credit demand and currency headwinds year-on-year, as well as an ever-increasing UK bank levy of which HSBC takes the lion's share.

“In 2014 return on tangible assets (ROTA) was at 68 basis points and we are unlikely to see HSBC beating that this/next year,” said Bernstein. “The real boost to ROTA comes in 2018 (we have it at 78bps), and we feel now is not a good time to be chasing that number given the number of macro dependencies,” it added.

Commenting on the relocation to Hong Kong, Bernstein that it should add 40p to the stock’s value, of which 20-30p is likely to already be in the price. “On the other hand, an about turn from the new UK government on the bank levy could actually keep HSBC in London. Either way, the upside from here is limited on the move,” it said.