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HSBC and RBS favoured banks at Credit Suisse; Lloyds and Barclays just 'neutral'

The Swiss investment bank rated both stocks at 'outperform' while staying 'neutral' on Lloyds and Barclays and negative at 'underperform' for Standard Chartered

HSBC - HSBC and RBS favoured banks at Credit Suisse

Credit Suisse (CS) has rated both HSBC Holdings PLC (LON:HSBA) and Royal Bank of Scotland Group PLC (LON:RBS) at ‘outperform’ as it turned its spotlight on the UK’s major listed banks.

For HSBC, the investment bank upgraded to ‘outperform’ from ‘neutral but trimmed its target to 635p from 655p, saying the bank was at a “pivotal stage” of its turnaround which offered an opportunity to drive a rate of return of over 11% by 2022, which would re-rate the share price.

Analysts added that going forward the company’s results on 18 February and UK and Asian macro data could provide positive catalysts for the stock, while risks of “less aggressive restructuring plans” and slowdowns in growth and interest rate expectations could push the price lower.

At RBS, Credit Suisse initiated the bank at ‘outperform’ with a target price of 260p, saying the expected that firm will “outperform peers” as it exceeded expectations for cost reductions.

CS also pointed to an “above-sector-average” total yield of around 8.5% in the shares, adding that the stock had underperformed the sector by 5% since December’s election.

Analysts were less optimistic on Lloyds Banking Group PLC (LON:LLOY), which was initiated at ‘neutral’ with a price target of 60p.

CS said the bank offered “the purest, most liquid exposure to UK macro”, although there was lots of uncertainty built into the price and they preferred banking stocks that had “an element of self-help” and weren’t entirely exposed to macroeconomic headwinds.

Barclays PLC (LON:BARC) was given a similarly flat assessment, initiated at ‘neutral’ with a 185p target, as analysts said the firm had “improved returns” through a recent restructuring but a better macro outlook was needed to improve returns.

“Given we forecast returns to fall through to 2021, we think Barclays will struggle to rerate”, they said.

At the bottom of the pile was Standard Chartered PLC (LON:STAN), which CS initiated at ‘underperform’ with a target price of 600p.

Analysts were “sceptical on how much management can cut costs to offset revenue pressure” at the bank, adding that despite a recent decline the shares were outperforming the wider sector by 5%.

CS also expected revenue downgrades in StanChar’s 2019 results, which are due on 27 February.

In mid-afternoon trading on Tuesday, HSBC shares were 2% higher at 589.7p, RBS was up 0.4% at 222.3p, Standard Chartered climbed 1.9% to 642.4p and Barclays rose 1.1% to 178.9p. Lloyds was the only stock of the five to decline, falling 0.6% to 56.5p.

Quick facts: HSBC

Price: 397.75 GBX

LSE:HSBA
Market: LSE
Market Cap: £81 billion
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