Goldman Sachs: Lowering the target price of HSBC Holdings (00005) to HK$188 to maintain a “buy” rating, deposit competition is the focus

The Zhitong Finance App learned that Goldman Sachs released a research report saying that after HSBC Holdings (00005) announced its third quarter results, the bank updated its profit forecast, focused on deposit competition, and lowered the target price by 2% from HK$192 to HK$188 to maintain a “buy” rating.

The bank pointed out that the basic profit before tax for the third quarter of foreign exchange control was 10 billion US dollars, lower than the bank's forecast of 4%, but in line with market expectations. Net interest income from banks and non-banks was weaker than expected, offset by lower provisions. Foreign exchange prices closed down 5.6% on October 27. Investors' discussions focused on the bank's net interest income trend because the deposit beta was higher than expected, and management mentioned the intensification of deposit competition and the conversion of demand deposits to time deposits, particularly in Hong Kong.

Goldman Sachs believes that if market conditions continue to weaken, further deposit transfers are still possible. However, part of the pressure may be due to foreign exchange control itself, as banks intend to protect or gain market share in the deposit market in Hong Kong to support stronger loan growth and rebuild Hang Seng Bank's position after privatization.

The bank lowered its profit forecast mainly because it was more cautious about net interest income trends, lowered the bank's net interest income forecast by up to 3.2%, and lowered the non-bank net interest income forecast by up to 2%, making the bank's forecast of profit before basic tax exemption from foreign exchange control 2026 to 2029 at most about 3% lower than market expectations.

The bank pointed out that FX Control's stock price has been adjusted by about 14% in the past month. It believes it has fully reflected concerns that the deposit beta is high and the bank's net interest income may be weak, and it continues to view FX Control as a bank benefiting from structural growth in deposits and wealth in Asia.