ShoreCap recommends switching out of HSBC and into Barclays, Lloyds and StanChart

ShoreCap stayed at a 'hold' on shares of HSBC following the lender´s third quarter results.

The analysts labelled the results, which threw up lower than expected revenues and bigger than anticipated impairments as "disappointing".

On the back of HSBC's results, they cut their estimates for its earnings per share in 2019, 2020 and 2021 by 8.0%, 9.0% and 10.0%, respectively.

"While lower interest rates, ongoing trade wars and unrest in Hong Kong are largely to blame for the more challenging revenue outlook, HSBC’s main problem remains the structural underperformance of its US, Continental European and UK Non Ring-Fenced Banking (notably Global Banking & Markets) operations," they said.

In turn, they marked down their estimate for the shares's fair value from 665.0p to 580.0p, telling clients that they should switch into shares of a combination of rivals Barclays, Lloyds and StanChart instead, all of which were buy rated.

Nontheless, given management´s moves to reduce its exposure to globally systemically important banks, they believed that regulators would not ask HSBC to hold more capital permanently.

"We assume that the dividend can be maintained and still expect share buy backs to be used to neutralise the dilutive impact of the scrip over time.

"Finally, we think these decisive moves mean that acting CEO Noel Quinn is now in pole position to step into the role on a permanent basis, replacing predecessor John Flint with whom the group recently parted company due to the pace of change being deemed too slow."