HSBC share recovery faces familiar headwinds

Q1 could scarcely have gone better, in Asia

Q1 could scarcely have gone better, in Asia

Whilst HSBC shares still show the ravages of investor disdain stemming from a dire 2018, Friday is their best day since January, with a 3% rise at best.

  • Q1 pre-tax profit +31% to $6.20bn, best in 14 quarters, forecast: $5.58bn
  • Adjusted revenues, +9% to $14.4bn, 3 times the pace of adjusted operating expenses
  • Core capital ratio rebounded to 14.3% after falling 50 basis-points in 2018

The biggest caution in the results was ironically represented by HSBC’s best return to previous strengths. 80% of Q1 profits were derived from Asia, with just 1% from Europe. And whilst the CEO’s aggressive spending crackdown helped all key divisions rebound, regionally, only Asia shone. Three years after a 14-year lawsuit over HSBC’s U.S. Household International ended, it still sees stateside operations as its “most challenging strategic priority”. Problem operations also showed little progress. Stock dealing tanked 34%, the worst equities performance across U.S. and European banks, leaving markets revenues down 5%.

Asia-over-dependence, intractable U.S. drag, and lacklustre rest-of-world has kept the share reaction measured most of the session. The buyback pencilled in for the half-year amid improving capital could underpin the stock’s recovery. But Q1 momentum looks unsustainable. And of all giant lenders, HSBC has certainly been amongst the least predictable lately.

Chart thoughts

  • Stock reaches top of 660p-686p resistance zone
  • Technical/fundamental outlook suggests near-term gap fill; watch 670p support
  • True deterioration would be symbolised by a break of 200-day average support (latterly 655p)
  • Remaining above 670p would imply conquest of the resistance zone soon

HSBC Holdings CFD [03/05/2019 12:53:44]

Source: City Index

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