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HSBC shares are now attractively priced after dropping more than 5 per cent yesterday, analysts say. 
The banks stocks fell 5.14 per cent, or HK$4.65, to HK$85.75 yesterday, compared with a 0.25 per cent rise in the Hang Seng Index. 
The sell-off followed chief executive Stuart Gulliver's first annual results announcement on Monday, when he said HSBC's operating expenses were  unacceptably high  and admitted it would lower targets for shareholders' returns.
'We are very concerned about our share prices, everyone is concerned,' Peter Wong Tung-shun,  HSBC's Asia-Pacific chief executive, said yesterday. 
Analysts, however, said most of the price correction had already taken effect and many, including those at Credit Suisse, JP Morgan, BNP Paribas and CLSA, have continued to offer 'buy' recommendations for the bank's stock. 
The lender lowered its profitability expectations by resetting return on equity to 12-15 per cent from 15-19 per cent on Monday. 
Return on equity measures bank's profits compared to shareholders' capital. 
'I think their return on equity target is deliverable,' said Sunil Garg, a JP Morgan analyst, adding that he believed the new target was too low and should be placed at 14-15 per cent as the bank continued to improve loan impairments in the US and make greater efforts to  cut  costs. 
Garg set a target price of HK$110 for HSBC shares. Credit Suisse's target price for HSBC is HK$97 while that of CLSA is HK$95.
However, the  low level that HSBC stands at - a return on equity of 9.5 per cent - calls into question the bank's ability to achieve its new target, said Thomas Mitchell, a senior analyst at trading firm Miller Tabak, in his report. 
Mitchell said the bank most likely would not be able to achieve its target without further reducing loan impairment allowances, which  were cut last year by 20 per cent.  
Also, rising wages in Asia  would  challenge  the bank's  cost-cutting. 
Wage costs in Asia were expected to continue to  rise despite surges  in the second half of last year, Wong said.
But the bank's operations in the Asia-Pacific were in a better shape in terms of cost-efficiency.
 Its cost-to-income ratio was 9.4 percentage points below the bank's overall ratio of 55.2 per cent, a figure Gulliver said he hoped to lower to around 52 per cent in two to three years. 
The Asia-Pacific operation also contributed more than 60 per cent of overall profit.
 Hong Kong was the single largest contributor, at 29.9 per cent.
'I would say their Asian business was satisfactory compared with the overall group,' said Dominic Chan, an analyst at BNP Parabas. 
While it was hard to say if the bank could sustain last year's 42 per cent loan growth in Hong Kong,  it stood to benefit from that growth this year, Chan  said.
Interest rates continue to remain at very low levels but the market expects rates to normalise by the end of this year.
Company business
The Hang Seng Index rose 0.25 per cent yesterday
However, HSBC suffered a sell-off following remarks by the bank that its operating costs are too high. Its share price dropped by HK$4.65 or: 5.14% 
The bank readjusted its return on equity target (what the shareholder gets) from 15-19 per cent to: 12-15%



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HSBC at HK$85.75 seen as a good deal