Two of London’s Asia-focused banks are pulling in different directions. UBS has lifted its price target for HSBC Holdings PLC (LSE:HSBA) after a strong third quarter, but kept the shares at 'neutral'.
Standard Chartered PLC (LSE:STAN), by contrast, stays on the bank’s 'buy' list after another earnings beat and a tidy upgrade to forecasts.
For HSBC, the latest quarter showed more progress than excitement. Adjusted profit before tax came in 9% ahead of expectations, helped by solid income growth and only modest cost pressures.
Impairments were in line, even as commercial real estate strains linger in Hong Kong and the Middle East. The bank’s core capital ratio of 14.5% was stable, and 2025 guidance on return on tangible equity has been nudged higher to “mid-teens or better”.
Still, the upside appears capped for now. UBS’s Jason Napier argues that lower buybacks will offset much of the earnings uplift, thanks to the capital cost of buying out minorities in Hang Seng Bank.
At about 9 times forward earnings, HSBC trades on a sector-average multiple that reflects its steady, if unspectacular, returns. The challenge, Napier writes, is to prove that its growth ambitions, particularly in Asian wealth, can justify the bank’s sprawling complexity.
Standard Chartered looks to have a cleaner story. Third-quarter profits beat consensus by 15%, driven by 4% higher income and lower impairments.
The core equity tier one ratio, at 14.2%, edged above forecasts, and UBS has raised its earnings estimates by up to 7%. Wealth management continues to shine, with record inflows from mainland Chinese clients and 15% growth in net new money this year.
UBS sees StanChart delivering around 14% return on tangible equity by 2027, with a 15% compound annual earnings growth rate from 2024 to 2028, a pace few European lenders can match.
At about 8 times 2027 earnings and 1.1 times book value, the valuation still looks undemanding.
Napier’s conclusion is that investors should start to discriminate more clearly between growth and value among the banks. HSBC offers stability and capital discipline, while Standard Chartered provides the faster growth story, at what UBS still thinks is a good price.