The HSBC (LON: HSBA) share price plunged hard last week as fears of contagion in the financial sector continued. The stock plunged to a low of 582p, the lowest level since February 7. The shares have retreated by more than 6% from the highest level this year.
Is HSBC at risk?
The collapse of several regional banks like Silicon Valley Bank (SVB), Silvergate Capital, and Signature Bank has led to significant jitters in the financial market. It has revived memories of the collapse of Lehman Brothers, which triggered the financial crisis in 2008/9.
As a result, most bank stocks crashed last week. As I wrote on Friday, the closely watched KBE ETF pulled back by double-digits as most bank shares crashed. Most of this decline was an overreaction. For example, the sharp decline in bank stocks like JP Morgan, Goldman Sachs, Morgan Stanley, and Morgan Stanley was irrational.
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HSBC share price retreated in both the UK and Hong Kong. However, a closer look at the company’s books shows that the company’s business is doing well. Its profit before tax declined to $17.5 billion because of the impairment of its France operations. Its revenue jumped by 4% to $51.7 billion.
HSBC’s balance sheet remains strong. In a note, the company said that its Common equity tier CET1 ratio of 14.6%, which was higher than the average ratio. Further, the company hopes to achieve a return on average tangible equity target of 12% this year.
Therefore, I believe that HSBC has a strong path going forward. It has a strong balance sheet and is going through a transformation period. It has already exited its key unprofitable markets like the United States, France, and Canada.
It has also become the latest lender to consider buying SVB UK business. The company also has a strong dividend that is safe. It is also considering a special dividend once the sale of HSBC Canada is completed.
HSBC share price forecast
HSBA chart by TradingView
On the daily chart, we see that the HSBA stock price has been in a strong bullish trend in the past few months. This rally was driven by the strong performance of the company and the ongoing pressure by Ping An, its biggest shareholder.
The stock then made a big bearish breakout last week as pressure on the banking sector emerged. Its lowest point last week was at the 50-day exponential moving averages.
Therefore, the stock will likely bounce back as investors attempt to fill the gap that formed last week. This could push the shares to about 615p in the coming days.
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