Goldman Sachs: Cuts HSBC HOLDINGS (00005) Target Price to HK$188, Maintains "Buy" Rating; Deposit Competition in Focus

Goldman Sachs released a research report stating that after HSBC HOLDINGS (00005) announced its third-quarter results, the bank updated its earnings forecasts, with a focus on deposit competition, and cut its target price by 2% from HK$188 to HK$188, maintaining a "Buy" rating. The bank noted that HSBC's third-quarter underlying profit before tax was US$10 billion, 4% below the bank's expectation but in line with market expectations. Bank and non-bank net interest income was weaker than expected, offset by lower provisions. HSBC's share price fell 5.6% at the close on October 27, with investor discussion centered on the trajectory of bank net interest income, due to higher-than-expected deposit beta and management's mention of intensified deposit competition and the shift from current accounts to time deposits, particularly in Hong Kong. Goldman Sachs believes that further deposit migration remains possible if market conditions stay weak. However, some of the pressure may be specific to HSBC, as the bank aims to defend or gain deposit market share in Hong Kong to support stronger loan growth and rebuild its positioning following the privatization of HANG SENG BANK. The bank cut its earnings forecasts mainly due to a more cautious view on net interest income trends, lowering its bank net interest income forecast by up to 3.2% and its non-bank net interest income forecast by up to about 2%, making its 2026-2029 underlying profit before tax forecasts for HSBC up to about 3% below market expectations. The bank noted that HSBC's share price has corrected about 14% over the past month, which it believes has fully reflected concerns over higher deposit beta and potentially weaker bank net interest income, and it continues to view HSBC as a bank benefiting from the structural growth of deposits and wealth in Asia.