HSBC, Europe’s largest bank, is facing renewed pressure from its biggest shareholder, Ping An, a Chinese insurer, to restructure its business by spinning off its Asia business. However, despite the noise, Morgan Stanley remains bullish and is calling HSBC its “top pick” in the sector. According to the bank’s analysts, led by Nick Lord, HSBC’s improving return on equity due to improving China GDP growth and sustained higher U.S. rates is a more significant focus. Morgan Stanley expects HSBC to deliver accelerating capital returns, including 50% of 202 earnings paid out in dividends and share buybacks amounting to $3 billion in 2023. The bank has a price target of 65.2 Hong Kong dollars ($8.30) on the Hong Kong-listed shares of HSBC, representing potential upside of 15.6% to its closing price on Thursday. Despite Ping An’s proposal failing to attract support from other large institutional shareholders, shareholders will vote on the matter at HSBC’s annual general meeting on May 5. Despite recent turmoil in the global banking sector and a challenging economic outlook, Morgan Stanley believes HSBC’s strong capital and liquidity ratios, as well as its exposure to some of the world’s faster-growing regions, make it a compelling buy. Shares of HSBC are up almost 16% this year, and Morgan Stanley expects more upside ahead.
