The investment bank maintained a ‘neutral’ rating on HSBC but raised its target price to 750p from 735p, citing foreign exchange movements.
Earlier this month, HSBC posted a 4.5% increase in pre-tax profit to US$10.7bn for the first half on the back of a 9.6% rise in net interest income to US$15.1bn.
But UBS said flat loans in the second quarter, further weakening in foreign exchange rates, seasonality in the Global Banking and Markets division and market-gearing in the wealth arm threaten income in the second half.
“Also, our estimates assume HSBC's share of Bank of Communications (China’s fifth largest bank) retained earnings will stop being recognised from the fourth quarter.”
UBS continues to expect earnings per share to rise 3% in 2018 to US$0.73 and to be unchanged in 2019.