The Zhitong Finance App learned that Xiaomo released a research report saying that it is expected that HSBC Holdings (00005) will record steady growth in profit in the second quarter due to improved net interest income and operating leverage, but rising credit costs will partially offset the impact. The bank raised the target price for foreign exchange control from HK$182 to HK$200, and the rating maintained an “increase in holdings”.
The bank predicts a 6% year-on-year increase in revenue for the second quarter of foreign exchange control, mainly driven by an 8% year-on-year increase in net interest income from banking business. The growth in non-interest income is moderate, and is expected to rise 3% year on year. Wealth management revenue is showing strong performance and is expected to increase 16% year over year. The bank expects operating expenses to increase by 2% year on year, and operating surplus profit before provision to increase by 10% year on year.
Xiaomo estimates that the annualized credit costs for the second quarter of Foreign Exchange Control were 50 basis points, of which about $200 million was related to the bank's estimated credit loss provision related to the bank's reported exposure of about US$400 million to the Dubai conglomerate IFFCO Group. Overall, the bank expects adjusted earnings before tax for the second quarter of FX Control to increase 7% year over year.
The bank raised its earnings forecast per share from 2026 to 2028 by about 2%, mainly driven by stronger net interest income from banking services. At the same time, fee revenue (especially banking and market business) increased slightly, but this was partly offset by rising costs. The bank expects management to raise the 2026 net interest income guidance from about US$46 billion to about US$47 billion.