WHAT THE BROKER SAYS
Merrill Lynch has lowered its recommendation on HSBC to 'neutral' from 'buy' and revised down slightly its cash pretax profit forecast for 2004 to US$19.9 billion.
A rise of 23 per cent since early May has left HSBC's share price close to the broker's previous price objective of $140.
HSBC is trading broadly in line with the global developed markets banks average while the broker's calculations show the bank is trading above fair value. With earnings momentum declining into next year, and low single-digit cash earnings per share growth, the stock's attractions are waning.
The broker says it now trades more expensively on a risk-adjusted return on equity than most of the other mega-banks - Bank of America, Citigroup, JPM, Royal Bank of Scotland and Wells Fargo. The counter closed at $132.50 on Friday.
