Halister News

(Bloomberg) -- HSBC reports 4Q results today after a tumultuous month in which the bank retracted a pay freeze, decided not to move its headquarters following months of deliberations, and is said to have scrapped plans to sell its Turkish business after struggling to find a buyer. ESTIMATES

• 2015 avg profit before tax $21.8b (range $20.5b-$23.2b), based on survey of 15 analysts compiled by HSBC
• 2015 loan impairment charges $3.04b (range $2.72b-$3.31b)
• 2015 net oper. income before LIC $61.8b (range $60.8b-$63b)
• ROE 8.6% (range 7.7%-9.9%)
• CET1 ratio 11.9% (range 11.4%-13.6%)
• Pretax profit by business:
  • Retail Banking & WM $5.9b (range $5.5b-$6.7b)
  • Commercial Banking $8.9b (range $8.8b-$9.3b)
  • Global Banking & Markets $8.1b (range $6.8b-$8.9b)
  • Global Private Banking $424m (range $356m-$567m)

ANALYST COMMENTARY

• Bernstein (market perform): 2016 div. is the big concern for investors, expects mgmt to give more precise div. policy beyond just being “progessive"; income outlook (loan growth/trade refinancing) also seen as key; risk may increase in 4Q due to provisions against commodities in N. America and MENA
• J Safra Sarasin (neutral): Quality of the loan book in focus as ‘‘any nasty surprise may reduce the dividend yield;’’ planned sale of Brazil business to Banco Bradesco reduces risk profile to some extent
• Investec (buy): Expects earnings to ‘‘materially’’ miss ests. from 2015-2017, though says that is already priced into the stock; sees dividend as sustainable, says decision to keep headquarters in London is ‘‘a missed opportunity’’ to escape U.K. bank levy
• Deutsche Bank (hold): Key issues are still revenue outlook, cost cutting, capital progression; renewed focus on costs amid likely weaker revenue environment; DB is skeptical of cost reduction plans over longer term
• Keefe, Bruyette & Woods (market perform): Looking for commentary on credit quality, more detail on energy/commodity exposure; too early to see meaningful effect from cost cutting

DATA

• HSBA LN is down 16% YTD vs 18% drop in FTSE All-Share Banks Index
  • 14 buys, 17 holds, 5 sells; avg PT ~GBp545 implies 21% return potential: Bloomberg data
• 5 HK is down 19% YTD vs 17% drop in Hang Seng Finance Index
  • 15 buys, 14 holds, 3 sells; avg PT ~$HK63 implies 25% return
• HSBC expected to announce 4Q div. of 21c, paid 10c in 3Q and 20c in 4Q14: BDVD
• Dividend yield in London over past 12 months 7.2%, expected to increase to 7.9% over next 12 months: Bloomberg data

RELATED

• Feb. 17, HSBC Said to Restructure Turkish Business After Scrapping Sale
• Feb. 17, HSBC Ordered to Disclose Bids Rejected for Brazil Unit, And Why
• Feb. 15, HSBC to Move 1,000 Bankers to Paris on ‘Brexit’, CEO Says
• Feb. 15, HSBC Keeps London Headquarters in Victory for U.K. Over Asia
• Feb. 11, HSBC CEO Gulliver Said to End Pay Freeze After Staff Revolt
• Feb. 6, HSBC Reaches $470m Accord Over Foreclosure Abuses

TIMING:

• HSBC reports noon H.K. time (4am London time)
• Conf. call 4:15pm H.K. time
• See TLIV for live blog of both events