HSBC share price: where next after weak results in Europe and US hurt profits?

Analysts remain mixed about the bank’s share price trajectory after the lender revealed an 18% drop in its third quarter profit last month, driven by weak results in its European and US units.

HSBC labelled the performance of its European and US divisions as ‘not acceptable’ in its third quarter (Q3) earnings at the end of last month.

Weak results from the two divisions contributed to the bank recording an 18% drop in profit to £3.8 billion in the three months to the end of September.

‘Parts of our business, especially Asia, held up well in a challenging environment in the third quarter,’ HSBC CEO Noel Quinn said. ‘However, in some parts, performance was not acceptable, principally business activities within continental Europe, the non-ring-fenced bank in the UK, and the US.’

‘Our previous plans are no longer sufficient to improve performance for these businesses, given the softer outlook for revenue growth,’ he said.

‘We are therefore accelerating plans to remodel them and move capital into higher growth and return opportunities.’

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Analysts have mixed feelings about the HSBC share price

Goldman Sachs reiterated its ‘buy’ rating for the stock in November, while Jefferies International upgraded its rating from ‘hold’ to ‘buy’.

The pair remain optimistic about the bank’s share price trajectory, with Goldman issuing a target of 865p, while Jefferies offered a target of 790p for the stock.

Based on HSBC closing at 579p on Tuesday, analysts from the two investment banks believe that the stock has a potential upside of between 36.4% and 49.3%.

But analysts from Berenberg do not share in Goldman Sachs and Jefferies optimism, with the Hamburg-based investment bank downgrading its rating for the stock from ‘hold’ to ‘sell’ this month.

Berenberg analysts also issued a target price of 490p, suggesting that the stock is overvalued and has a potential downside of -15%.

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