HSBC’s stock price has dropped more than two per cent this morning after being downgraded by Deutsche Bank analysts from a Buy to a Hold.
The FTSE 100 bank received a target share price of £9.10 from Deutsche Bank, compared to its current share price of £8.27.
“After a substantial increase in share price, the value, in our view, is no longer there,” said Deutsche Bank analyst Robert Noble.
HSBC’s stock price is up by 33 per cent over the last six months, as the bank has pledged to make $3bn (£2.4bn) in cost savings and reorganise into four new divisions, split between East and West.
Last week, it was revealed that the bank was looking to wind down parts of its investment banking operations across the UK, Europe and North America.
While the rising stock price might be have been good news for the bank over the last six months, analysts don’t expect the shares to go much further.
“HSBC doesn’t have to do a lot to maintain a healthy mid-teens ROTE [return on tangible equity] after many years of restructuring,” added Noble.
“We expect any incremental restructuring will be relatively small and aimed at maintaining ROTE levels against a falling rate environment across a global cost base.”
Meanwhile, RBC analyst Benjamin Toms said that forecasting HSBC’s financial had become “tricky” thanks to the cost-cutting and restructuring.
RBC has a target price of £9 for the FTSE 100 bank, with an upside scenario of £9.50 and a downside scenario of £6.
Toms argued that current analysts estimates were too high for the bank’s revenue and capital expenditure, expecting revenue for 2025 to come in 1.2 per cent below consensus at $64.2bn (£52.1bn).
“Our detailed analysis suggests headwinds from business disposals, capital markets exits, interest rate movement net of hedging are only partially offset by loan growth and fee growth,” said Toms.
As interest rates have begun to fall worldwide, RBC modelling showed that this will cause a $2.5bn (£2bn) cut to HSBC’s revenues throughout the year.
HSBC’s annual results are due out in two weeks, on 19 February.