RBC Capital Markets raised its price target for HSBC Holdings PLC to 1,375p from 1,275p after the bank reported strong second-quarter results. The new target is below HSBC's share price of 1,525.8p at the time of the note. This suggests that much of the bank's improved outlook is already reflected in its stock price. RBC also increased its adjusted pre-tax profit forecast for 2027 by 5%. This change is based on higher net interest income (NII) and fees, even with rising expenses.
Key Details
HSBC reported an adjusted pre-tax profit of $10.34 billion for the second quarter. This figure exceeded consensus estimates by 5%. Adjusted revenue reached $19.04 billion, beating expectations by 2%. Banking NII was $11.64 billion, which is 1% above consensus. RBC forecasts that banking NII will rise to $47.4 billion in 2026 and $50.2 billion in 2027. Adjusted earnings per share (EPS) estimates have increased to $1.80 for 2026 and $2.03 for 2027.
Background
Meanwhile, UBS maintained an 'overweight' rating on European banks after a strong earnings season. The 40 major lenders tracked by UBS reported pre-tax profits about 6% above consensus. This improvement was helped by better net interest income and stable costs. UBS raised its earnings per share forecasts by about 2% for this year and 1% for 2027. They expect sector earnings to grow 12% in 2026 and 15% in 2027.
Related coverage: Metro Bank Posts Record Profit but Shares Drop 9.3%, FTSE 100 Gains as Gold Prices Rise, Pru and HSBC Decline.
The upgrades to profit forecasts for HSBC and other European banks could boost investor interest in the banking sector. This is especially true for shares of HSBC and its peers. This trend may support higher valuations and dividend yields, making bank stocks more appealing to investors. Watch for upcoming earnings reports from major banks, as they may provide more insights into the sector's performance.
Based on reporting by: proactiveinvestors.co.uk