Profile image
By ProactiveInvestors (Reporter)
Contributor profile | More stories
Story Views

Last Hour:
Last 24 Hours:

How has Trump’s victory changed the game for banks?

Monday, November 14, 2016 3:49
% of readers think this story is Fact. Add your two cents.

The game has certainly changed since Donald Trump won the US election, especially for banks.

According to US broker Jefferies, we are in uncharted territory. The broker’s immediate focus is on Janet Yellen’s future as chairperson of the US central bank, and the Federal Reserve’s policy on interest rates.

Recently released US economic data is increasingly supportive of a December rate hike, but the Fed could err on the side of caution if global markets and macro indicators deteriorate past a Brexit-like initial reaction, Jefferies reckons.

“Trump’s prior comments about Fed Chairperson Janet Yellen will introduce questions as well about her tenure. Over the longer-term, if Trump’s pro-growth policies boost inflation expectations and the yield curve steepens, additional rate hikes could follow and have positive impacts to bank fundamentals,” Jefferies said.

That’s a view echoed by UBS, which in a note ostensibly reviewing the third quarter earnings statement from banking behemoth HSBC Holdings PLC (LON:HSBA), said “watching HSBC just got a lot more interesting”.

HSBC‘s 3Q16 earnings and capital were both better than we forecast, but the real drivers of the stock’s absolute and relative performance in the coming months will, we think, be changes to the market view on prospects for a parallel shift in the US$ rate curve in a Donald Trump-lead America and sterling’s performance against the US$,” UBS said, as it trimmed its price target for HSBC, derived from a sum-of-the-parts calculation, from 585p to 580p.

“Textbooks tell us these should act in the same direction – higher rates means higher EPS and stronger US$, both good for the HSBC share price. Into the first year of UK post-referendum negotiations, we believe many will seek safety and income in this stock,” UBS reckons, though it sticks with its neutral rating, as it believes the valuation already more than reflects its base case.

As for HSBC’s third quarter numbers, they were 6% better than consensus forecasts, mainly because of a better outcome in impairment charges in dollar terms, but these “didn’t really flow through to earnings revisions”, UBS noted.

Its own estimates have been left broadly unchanged, with sterling and euro weakness expected in the fourth quarter likely to provide head winds, which will offset the modest benefit from HSBC’s share buy-back programme.

Shares in HSBC were up 1.9% at 631.4p in mid-morning trading.

Story by ProactiveInvestors


We encourage you to Share our Reports, Analyses, Breaking News and Videos. Simply Click your Favorite Social Media Button and Share.

Report abuse


Your Comments
Question   Razz  Sad   Evil  Exclaim  Smile  Redface  Biggrin  Surprised  Eek   Confused   Cool  LOL   Mad   Twisted  Rolleyes   Wink  Idea  Arrow  Neutral  Cry   Mr. Green

Top Stories
Recent Stories



Top Global

Top Alternative



Email this story
Email this story

If you really want to ban this commenter, please write down the reason:

If you really want to disable all recommended stories, click on OK button. After that, you will be redirect to your options page.