ON TUESDAY, HSBC Holdings will announce its interim results and some analysts are predicting a growth in earnings per share of up to 44 per cent in Hong Kong dollar terms, and 83 per cent in sterling.
Although the outlook for the local banking sector is a little dismal, few are preparing for a disappointment, despite the poor performance of subsidiary Hang Seng Bank two weeks ago.
But the bank still seems to hold problems for analysts and investors alike. Analyst with Smith New Court, Gary Baker, explained it was difficult to pin the bank down. He said: ''The bank is so much of a global story now. Investors looking for a play on Hong Kong might see it as that, and yet its overseas holdings make it so much more.'' Managing director of UBS Securities Hong Kong, John Mulcahy, also insisted HSBC was not a play on the Hang Seng Bank. He believed a sell-off on HSBC following the poor Hang Seng Bank results was an overreaction.
He said: ''HSBC is a play on its overseas holdings such as the Midland Bank and Marine Midland in the United States, which are showing signs of recovery.'' However, there is little doubt HSBC is undervalued. Regional Banking Research Director for Credit Lyonnais Securities Asia, Laura Grenning, said HSBC's interim results could be promising.
She said: ''I expect in Hong Kong dollar terms earnings per share to grow by 44 per cent to $4.43 from $3.08. But in sterling terms, the growth will be more dramatic due to currency fluctuation. In sterling terms I see a growth of 83 per cent, from 21p to 38.5p.'' Despite the decelerating growth in the local banking sector, Ms Grenning believed the market was wrong to tar HSBC with the same brush as Hang Seng Bank.
Ms Grenning pointed to Hongkong Bank's Asian operations. She said: ''The bank has a viable and feasible network in Malaysia and in Singapore. Both sectors are looking at accelerating growth.