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In November, HSBC reported third-quarter profits of $4.53 billion, up 30% from the same period in 2012. The figure came in below analysts’ estimates of $5.54 billion; the share price has dropped over 6% since the announcement. The increase in third-quarter profit was attributed to cost-cutting, fewer impairments on loans and increased focus on the Far East.
HSBC is in a much stronger position than other British banks like Lloyds or Royal Bank of Scotland, as it didn’t over extend during the UK property boom. That being said, the bank has a large amount of exposure to Latin America which could prove costly given the uncertainty in Argentina.
If the bank puts aside more funds as a contingency for fines in relation to manipulation of the foreign exchange market, we could see the share price take a hit.
The consensus for fourth-quarter profits is £4.06 billion, but I would pay close attention to the potential write-downs in South America and provisions for fines from regulators.
The trend-line over the past 26 months is providing support at 618p, which has been a key level over the past decade. A drop below 618p could push the share price below 600p.
The stock is hitting resistance at 690p and if we break through it the next target would be 708p.