JPMorgan has released a research report, stating that it expects HSBC Holdings PLC (00005) to benefit from improvements in net interest income and operating leverage, leading to robust profit growth in the second quarter, though this will be partially offset by rising credit costs. The firm has raised its price target for HSBC from HK$182 to HK$200, maintaining its "Overweight" rating.
The firm forecasts that HSBC's second-quarter revenue will increase by 6% year-on-year, primarily driven by an 8% year-on-year rise in net interest income from its banking business. Growth in non-interest income is expected to be more moderate, projected to increase by 3% year-on-year. Wealth management revenue is anticipated to be strong, with an estimated year-on-year growth of 16%. JPMorgan expects operating expenses to rise by 2% year-on-year, resulting in pre-provision operating profit growth of 10%.
JPMorgan estimates HSBC's annualized credit costs for the second quarter to be 50 basis points, with approximately $200 million of this related to expected credit loss provisions associated with the bank's reported exposure of around $400 million to the Dubai-based conglomerate IFFCO Group. Overall, the firm expects HSBC's adjusted pre-tax profit for the second quarter to grow by 7% year-on-year.
The firm has raised its earnings per share forecasts for HSBC for 2026 to 2028 by approximately 2%, primarily driven by stronger net interest income from the banking business. This is coupled with a slightly improved growth momentum in fee income, particularly from banking and markets business, though this is partially offset by rising costs. JPMorgan anticipates that management may raise its 2026 net interest income guidance from approximately $46 billion to around $47 billion.
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