JPMorgan has issued a research report stating that it has raised its earnings per share forecasts for HSBC Holdings PLC (00005) for 2026 to 2028 by 10%, 13%, and 15% respectively, due to an upward revision in net interest income projections. The target price for HSBC has been increased from HK$165 to HK$180, implying a forecast price-to-book ratio of 2.0 times. The target price for Standard Chartered PLC (02888) remains unchanged at HK$270, implying a forecast price-to-book ratio of 1.5 times. Both banks maintain an "Overweight" rating. The firm estimates that HSBC's share buybacks from 2026 to 2028 will amount to $6 billion, $11 billion, and $11 billion, respectively.
Share prices for both HSBC and Standard Chartered have adjusted this month, reflecting investor concerns over the impact of Middle East conflicts and exposure to private credit risks. The bank's analysis assumes that potential credit losses from Middle East loan exposures leading to higher impairment charges, additional credit costs due to global macroeconomic risks, lost earnings from Middle East operations, and losses from private credit exposures could collectively reduce HSBC's 2026 earnings per share and return on tangible equity by 10% and 180 basis points, respectively. For Standard Chartered, 2026 earnings per share and return on tangible equity could decline by 14% and 184 basis points. Standard Chartered is considered more sensitive to Middle East conflicts, while HSBC has greater exposure to private credit risks.
These projections are based on assumptions including incremental credit costs of 5 basis points on general provisions, a 10% loss rate on Middle East exposures (which constitute 30% of the total), and a 20% downside risk to pre-tax profit from the Middle East region. JPMorgan believes that the current share prices of HSBC and Standard Chartered have largely factored in these potential downside scenarios. It views the current levels as an appropriate opportunity to build positions in both banks, as the medium-to-long-term investment thesis remains intact, with an estimated total return of approximately 7% even under stressed conditions.
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