not vested
HSBC (5 HK/HSBA LN) - Targeting 10%+ return on tangible assets; dividend beat
HSBC 4Q20 results beat consensus estimates with profit before tax came in 23% higher than expected, which was mainly driven by higher revenue, better-than-expected net interest margin & lower estimated credit loss.
Common Equity Tier 1 (CET1) ratio was a strong beat at 15.9%.
A final dividend of US15cents (all cash) is declared (vs. consensus estimate of US13 cents).
HSBC provided strategy update with a new Return on Tangible Equity (ROTE) target of 10%+ by 2023-24e.
Key in achieving the new ROTE target will be lifting medium- to long-term revenue growth target to mid-single digit and keeping cost under control.
Targeted CET1 ratio is in the range of 14-14.5%.
A positive surprise in prospect of higher longer-term capital distribution.
HSBC will consider share buybacks and special dividend after 2021e.
The stock is trading at 0.7x forward P/B & 4% forward dividend yield. We expect dividend resumption, revenue reflection, an updated strategy to continue to focus on growth and return will support share price outperformance.
Our Fair Value estimate is revised up to HK$54 (5 HK) / GBp496 (HSBA LN) which is set at a higher multiple of 0.8x forward P/B. BUY.
Source: OCBC