RBC Capital downgrades HSBC, says shares looking ‘more fair value’

RBC Capital Markets downgraded HSBC on Wednesday to ‘sector perform’ from ‘outperform’ and cut the price target to 775p from 825p as it said the shares are looking more fair value.

It noted that HSBC has outperformed UK bank peers by 31% year-to-date, but said now is a good time to take profits.

"Earnings momentum looks to have turned and an improved capital distribution profile is now reflected in consensus," it said. "Therefore, with the shares looking more fair value, we downgrade our rating."

RBC said rates are expected to fall by around 190 basis points weighted across HSBC's core geographies over the next two years, broadly equivalent to a headwind of around $5bn.

It said the headwind from lower rates will be partially offset by balance sheet growth, but that is unlikely to be anything "remarkable" about over the next two years.