Credit Suisse upgrades HSBC as expansion drives growth

After shares in HSBC endured a 12% year-to-date underperformance compared to UK domestic banking peers, analysts at Credit Suisse upped their rating and price target.

Taking a fresh look at the lender after a 2017 where growth was "not exceptional", the analysts upgraded the Hong Kong and Shanghai lender to 'neutral' from 'underperform' in a note to clients on Thursday, adding 10p to its target price to take it to 690p.

With HSBC's risk/reward seen as becoming "more fairly balanced" approaching a strategy update scheduled for around 6 August, and amid recent intervention by the Hong Kong Monetary Authority to support that nation's currency and boost the Hong Kong inter-bank offered rate, the analysts predicted a 3% boost to the bank's net interest income, providing it with further share price support.

Following a recent trip to Asia, the analysts saw HSBC's focus is on expansion throughout Asia, with underlying franchise development, rather than favourable rates/equity markets, driving growth.

CS said that HSBC's results "should be reassuring" to investors, but noted that no buyback announcement was expected just yet and did not anticipate any exceptional news ahead of its strategy update.