Source: Sharecast
RBC Capital said HSBC's FY27 adjusted pre-tax profit estimates had increased by 6%, driven by higher banking net interest income and other income, which was partially offset by higher operating expenses.
On a divisional basis, RBC said the increase was driven by corporate and investment banking, as well as its International Wealth and Premier Banking unit and the firm's performance in Hong Kong. It also noted that HSBC's lower UK contribution could be explained by lower net interest margin expansion and the negative impact from the restatement.
"We model banking NII of $46.5bn/$48.5bn/$49.8bn in FY26E/27E/28E, respectively (guidance FY26 c.$46bn). For costs, we model underlying growth of 0.9%/2.0%/1.7% in FY26E/27E/FY28E, respectively (guidance FY26 c.1%)," said RBC, which has a 'sector perform' rating on the stock.
"We model cost of risk of 45bps in FY26 (guidance c.45bps), coming down to 38bps in FY27-28E, towards the top end of management's through-thecycle 30-40bps target range. This leads us to an ROTE ex notable items estimate of 18.3%/19.0%/19.4% in FY26E/27E/28E, which compares to management's guidance of '17% or better' in FY26-28E."
Reporting by Iain Gilbert at Sharecast.com