Hold onto HSBC despite hefty redress: Croesus
HSBC’s revelation it was setting aside $1.3bn (£828m) in consumer redress, including for payment protection insurance claims, is still no reason to ditch the stock, analysts have claimed.
In its latest Croesus note, the analyst team at Charles Stanley, led by Jeremy Batstone-Carr, said: “The first half of the year has not been plain sailing for HSBC. Market conditions have remained difficult for the wealth management business.
“The group has needed to make a further provision for PPI redress in the UK and a $0.7bn provision in relation to money laundering breaches.”
The note also warned HSBC has suggested that, given the high degree of uncertainty regarding the latter, the final amount it could have to pay could be significantly higher.”
According to the analysts, the group remains “a fair way short” of achieving all its strategic targets.
In its report and accounts, which were released to the markets this morning (30 July), HSBC revealed total operating expenses of $21.2bn (£13.5bn) had increased by 3 per cent, compared with the first half of 2011.
Its strategic target range for the return on average ordinary shareholders’ had been between 12 per cent and 15 per cent; the reports revealed the return was 10.5 per cent and earnings per share were down 12 per cent to $0.45c compared with the second half of 2011.
However, despite these disappointing first-half results, the Croesus team believes HSBC has made “good progress in repositioning the business” so it is only recommending investors to hold, not to sell the stock.