[ET Net News Agency, 4 August 2020] J.P. Morgan said HSBC Holdings' (00005) 2Q results
are 12% below company-consensus at the adjusted PBT level driven by impairments of
US$3.8bn, which were 44% above consensus as a result of a US$1.5bn ECL (expected credit
loss) charge in the UK from forward guidance updates.
Asset quality is below expectations with the FY2020 impairments range now indicated to
be US$8-13bn compared to US$7-11bn previously. Revenues were 3% above consensus, driven by
Non-NII/Trading income while NII (net interest income) was 1% below consensus as NIM (net
interest margin) was -21bps q/q driven by lower rates in HK and the UK.
Costs were better at 6% below consensus estimates. Capital improved as seen across the
sector with CT1 15% (14.9% fully-loaded) compared to consensus at 14.4%.
Following these results, JPM expects downward revisions to estimates driven by top-line
pressure (>US$3bn headwind in 2020 and more in 2021) partly offset by costs. It remains
"neutral" on HSBC, with a target price of HK$35. (KL)