HSBC is ‘exceptionally attractive’ value if interest rates rise (and cheap if they don’t) says UBS

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HSBC PLC (LSE:HSBA) has been upgraded to a ‘buy’ by the analysts at UBS, who says the Asia-focused bank is cheap if interest rates don’t rise and very cheap if they do.


The bank has been penalised relatively compared to its peers by worries over rates, mainland China-linked real-estate, restructuring, geopolitics, and a market preference for more focussed plays.


UBS says HSBC’s financial performance should inflect in 2022 and leaving it ‘exceptionally attractively valued’ if rates rise.


Management aims to deliver 5% a year income growth, while cost discipline and US$7bn in restructuring spend should deliver 10% a year pre-provision profit growth, before any rate hike impacts.


Rate cuts have cost the bank 20% of pre-tax profits since 2019 so even a marginal recovery in margins should mean strong profit momentum for a bank with US$770bn in excess deposits and TNAV, said UBS.


This should start to come through next year with UK hikes.


Buy, from neutral, is the investment rating now with 25% upside and more to come overtime says UBS, which has a price target of 485p.


Shares rose 3.6% to 407.1p.

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