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JP Morgan sees "opportunity to add" in StanChart and HSBC
Analysts at JP Morgan told clients the recent pull-back in shares of Standard Chartered and HSBC, respectively, was an "opportunity to add", reiterating their 'overweight' and 'neutral' recommendations for each one, respectively, with the former also named a 'top pick'.
After meeting with StanChart and three days spent with HSBC's management, the investment bank concluded that the 'risk-reward' in shares of both lenders was "positive", adding that it expected their first quarter numbers to reassure.
"Our view is that there is limited near-term impact on growth trends for these two banks from recent news-flow around trade," they added.
Instead, medium-term profitability was likely to be driven by a combination of higher interest rates in the US and locally, "resilient" asset quality trends with an improvement in credit in some markets and a positive outlook for loan growth across retail and wholesale.
Regarding the stand-off on the international trade front, JP Morgan's 'base case' was for a negotiated agreement with further internationalisation of the yuan included.
JP Morgan had a target price of 730p on HSBC and of 930p for StanChart.
"While HSBC has a stronger franchise, our view is that StanChart has more upside from recovery given it is more geared to a supportive Asian backdrop."