Morgan Stanley slightly adjusts the target prices for HSBC and Standard Chartered, rating them as "Overweight."

Morgan Stanley published a research report on the banking sector, expecting that the performance of banks in the Asia-Pacific region in the first quarter of this year will be driven by higher non-net interest income. Morgan Stanley anticipates that HIBOR will decline by approximately 66 basis points quarter-on-quarter, putting downward pressure on the net interest income of HSBC (00005.HK) and Standard Chartered (02888.HK). However, this impact will be offset by strong non-net interest income driven by market volatility.

Due to geopolitical risks and macroeconomic uncertainties, Morgan Stanley expects credit costs may be recognized earlier in the first quarter of this year. For HSBC, it is anticipated that management will make an additional provision of USD 250 million. In terms of capital returns, Morgan Stanley expects that HSBC will only resume share buybacks in the second quarter, while Standard Chartered typically announces share buybacks during half-year and full-year results.

Looking ahead, Morgan Stanley believes that uncertainty will persist. As it expects the timing of interest rate cuts to be delayed by a quarter this year, Morgan Stanley has raised its net interest income forecasts for both banks. The level of capital market activity for the remainder of this year remains uncertain. Morgan Stanley has slightly adjusted the target prices for HSBC and Standard Chartered by less than 1%, setting target prices at HKD 149 and HKD 195, respectively, both with a "Buy" rating; it is expected that the investor seminar in May will be the next key catalyst for both banks