HSBC restructuring improves capital position
(25 January 2013 – China) As HSBC China restructures, it has increased the bank’s capital position, increasing the bank’s 2013 fully loaded Basel III core Tier 1 ratio by 80 basis points to 11.5 percent.
A source reported HSBC should not be hugely affected by the actions of some national regulators who have raised concerns about the geographic distribution of banks' capital.
"Recent restructuring enhances the capital position both by geography and for the group overall.
"Anticipating an 11.5 percent fully loaded Basel III core Tier 1 ratio, more than 15 percent underlying earnings growth and close to a 6 percent dividend yield in 2013, we maintain our Overweight rating and HK$90 price target," the source reported.
"We find that HSBC's subsidiarised legal structure means that little adjustment will be needed and that it is already well capitalised in both its overseas businesses and in the UK.
"Restructuring further improves capital position: The sale of HSBC's US cards business in 1H12 and the more recently announced plans to restructure its China stakes further enhance the company's capital position."
The source gave HSBC a strong dividend outlook: Although the China stake restructuring leads to a loss of associate earnings we continue to expect a significant pick up in the dividend to US$60c in 2013.
"At 56 percent, the payout ratio is within the 40-60 percent range targeted by management and we believe that the dividend is further supported by the strong capital position."
"Recent restructuring enhances the capital position both by geography and for the group overall.
"Anticipating an 11.5 percent fully loaded Basel III core Tier 1 ratio, more than 15 percent underlying earnings growth and close to a 6 percent dividend yield in 2013, we maintain our Overweight rating and HK$90 price target," the source reported.
"We find that HSBC's subsidiarised legal structure means that little adjustment will be needed and that it is already well capitalised in both its overseas businesses and in the UK.
"Restructuring further improves capital position: The sale of HSBC's US cards business in 1H12 and the more recently announced plans to restructure its China stakes further enhance the company's capital position."
The source gave HSBC a strong dividend outlook: Although the China stake restructuring leads to a loss of associate earnings we continue to expect a significant pick up in the dividend to US$60c in 2013.
"At 56 percent, the payout ratio is within the 40-60 percent range targeted by management and we believe that the dividend is further supported by the strong capital position."
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