Morgan Stanley predicts that HSBC and Standard Chartered's normalized ROTE can expand in the next two years, raising the target price

JP Morgan published a research report indicating that HSBC HOLDINGS (00005.HK) and STANCHART (02888.HK) have seen their stock prices rise by 29% and 26% respectively over the past three months, outperforming the Hang Seng Index by approximately 26 and 23 percentage points during the same period. JP Morgan expects that the trend of outperforming the market will continue, driven by growth in book value, dividends, and share buybacks, predicting annual returns of 12% and 15% for HSBC and STANCHART respectively.

JP Morgan believes that a stable interest rate outlook has enhanced investor confidence in the sustainable tangible return on equity (ROTE) of the two banks, forecasting that the normalized ROTE for HSBC and STANCHART could expand by 48 and 32 basis points respectively from 2025 to 2027. It also anticipates that both banks have further potential for valuation re-evaluation, with the upcoming announcement of last year's fourth-quarter results potentially serving as a short-term catalyst. Currently, it is expected that revenue growth for both banks will be steady, with adjusted normalized earnings for HSBC expected to remain flat, while STANCHART is estimated to achieve double-digit growth.

JP Morgan raised the target price for HSBC from HKD 138 to HKD 165; the target price for STANCHART was raised from HKD 190 to HKD 265, both maintaining an "Overweight" rating, and showing a preference for STANCHART due to higher potential growth and valuation re-evaluation potential