HSBC shares weighed down by Covid-19 pandemic

The lender will unveil its first quarter results next week, with the stock under pressure due to the economic fallout from the Covid-19 crisis ahead of its latest set of earnings.

HSBC will unveil its first quarter (Q1) results next week, with the stock under pressure due to the economic fallout from the Covid-19 crisis.

So far this year, HSBC has seen its share price fall 30%, with the bank forced to suspend dividend payments throughout 2020 in a bid to strengthen its balance sheet during these uncertain times.

In fact, the world’s local bank told investors in March that it will not make any quarterly or interim dividend payments, or any share buy-backs until 2021.

HSBC warned shareholders that due to the global impact of Covid-19, and in particular its influence on central banks’ decisions to lower interest rates, it forecasts lower-than-expected revenues in insurance manufacturing, as well as higher than expected credit losses.

HSBC will unveil its Q1 results on 28 April.

Barclays maintain ‘underweight’ rating for HSBC

Analysts at Barclays remain underwhelmed by HSBC in 2020, reiterating its ‘underweight’ rating for the stock and lowering its price target to 420p per share.

HSBC is trading at 416p a share as of 15:30 (GMT) on Monday.

Barclays justified its assessment of HSBC by pointing to its earnings challenges for 2020 and beyond into next year, though conceded that it and fellow lender Standard Chartered could both benefit from a ‘sentiment rebound if Asia emerges from Covid-19 earlier’.

Speaking more broadly about the impact of the coronavirus pandemic on UK banks, analysts at Barclays said that while ‘potential for losses is high’ it believes that bank shares ‘effectively price in a severe downturn’.

‘We estimate current valuations imply £70bn of aggregate losses for our UK banks, or 50% off domestic bank capital,’ Barclays said in a note.

‘We expect a combination of painful rate cuts and weak activity to drive pre provision profits down circa 20% year-on-year,’ Barclays added. 'Likely strong Q1 trading income could prove to be an aberration.’

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