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05 May, 2021 15:13 05 May, 2021 15:13

Numis upgrades HSBC to 'buy', says 'short squeeze' possible

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Analysts at Numis have upgraded their view on shares of HSBC following the lender's first quarter results.

They also cautioned clients that there was a risk of a 'short squeeze' in the stock at some point.

The analysts upgraded their recommendation from 'add' to 'buy' and hiked their 12-month target price from 465.0p to 525.0p.

Of the latter, roughly 50.0p per share reflected a 10.0% upward revision to their estimate for HSBC's full-year normalised free cash flow.

Another 10.0p meanwhile was the result of the higher expected dividend payouts between 2021-23 and Numis's projection of greater excess capital at the end of 2023.

According to the analysts, th elender's net interest margin would bottom in the second quarter of 2021, before initiating a gradual recovery.

"The speed and scale of this will be largely rate dependent, but with medium-term rates already rising we believe the risk is to the upside. With loan growth recovering to c4% per annum we believe net interest income should comfortably grow at 5-6% from 2022E, driving total revenue growth of at least 4-5%," they explained.

Assuming a dividend yield of 3.6%, the total shareholder returns on offer was about 23%, they said.

"With many investors structurally underweight HSBC, reflecting the amount of stock held by Ping An (8%) and Hong Kong retail investors (c.30%), we believe there is the risk of a squeeze in the share price at some point."


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Pilling and Co Stockbrokers Ltd. is not responsible for the content or accuracy of third party news articles and we may not share the views of the author or publisher.

We provide third party news for your convenience and information only and make no representation or endorsement whatsoever and hereby exclude all liability for any loss or damage that may be incurred by you as a result of your access or use. Please note that third party content may be subject to terms and conditions imposed by the third party owner of that content.