- Summary:
- HSBC share price is at the lowest level in more than a decade and technicals suggests that the worst is yet to come for Europe's biggest banking group
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HSBC share price is under intense pressure today in London and Hong Kong after the bank reported weak quarterly earnings. The bank’s shares are down by more than 5.45% in Hong Kong and by more than 4.68% in London.
HSBC earnings fall
HSBC share price are falling in reaction to the bank’s weak earnings. In its earnings release, the bank increased its reserves for bad loans to more than $3.8 billion in the second quarter. That was a sharp increase from just $555 million a year ago. Worse, the bank warned that these reserves were likely to spike to as much as $13 billion this year.
As a result, the bank, which is the biggest bank in Europe’s earnings dropped by 82% to $1.1 billion. Analysts polled by Bloomberg were expecting the earnings would be at about $2.5 billion.
The weak earnings and guidance puts the bank’s CEO under pressure as he accelerates his efforts to turnaround the beleaguered firm. He is now in the process of laying-off thousands of staff in Europe and Asia. He is also adding some wealth managers in China, where it hopes to increase its competition with Nomura and Credit Suisse.
HSBC is not the only British bank to increase its loan provisions. Last week, Lloyds Bank set aside 2.4 billion pounds to provisions. Similarly, NatWest, formerly known as the Royal Bank of Scotland (RBS) set aside 2.8 billion pounds to provisions while Barclays added 1.7 billion to reserves.
HSBC share price is at $33.10 in Hong Kong and 325p in London.
So is HSBC share price cheap enough to invest in?
HSBC share price is at the lowest level since March 2009, during the financial crisis. The shares are also in the seventh consecutive months in the red. At the same time, analysts are extremely bearish about the firm.
In a statement last week, JP Morgan lowered its price target for the bank to 400p from the previous 510. Analysts at Morgan Stanley, Credit Suisse, Barclays, and Deutsche Bank have also reiterated their sell rating on the firm.
HSBC Stock Price Analysts Forecasts
However, there is hope that HSBC share price will rebound. For one, the bank is now shifting its focus on Asia, which is seeing increased growth compared to Europe. Still, the bank will remain in the defensive as it tries to navigate the ongoing geopolitical issues.
HSBC stock price technical analysis
The monthly chart below shows how bad things have been for HSBC share price. At the current level of 326p, the shares are more than 50% below the highest point of 800p where it was in 2018. The price is below the 50-day and 100-day weighted moving averages. Also, the RSI has moved to the lowest level in history.
Therefore, in the near term, I suspect that the shares will continue being under pressure as bears target the next support at 270p. On the flip side, a move above 400p will invalidate this trend.
HSBC share price forecast
