Goldman ups HSBC target, highlights room for capital returns

Goldman Sachs lifted its target price on shares of HSBC, highlighting the lender's stable net interest income in the States and the potential for it to return capital to shareholders now.

Markets were likely to focus on the lender's better-than-expected revenues and capital formation, with its common equity Tier 1 ratio having been boosted by 70 basis points quarter-on-quarter to 14.3%, Goldman said.

The latter was well ahead of the 13.7% reading markets had anticipated with 40 basis points-worth of that attributable to better collateral netting and other movements.

"With HSBC now significantly above its c.13% CET 1 target range, we believe investor focus will be on what implications this could have for capital return potential. All-in, we expect a positive share price reaction," analysts Martin Leitgeb, Nick Baker, Sean Nordquist and Gurpreet Singh Sahi said in a research note sent to clients immediately following the results.

They also called attention to how higher rates in the States and wider deposit spreads had compensated for previously flagged headwinds such that its net interest income trends were stable.

Following on from the above they bumped up their target price on the shares from 725.0p to 740.0p while reiterating a 'Neutral' stance.