HSBC stock price falls following Deutsche Bank downgrade and restructuring plans

HSBC's share price has experienced a decline of over two per cent this morning following a downgrade by Deutsche Bank analysts from 'Buy' to 'Hold'.

The FTSE 100 bank was assigned a target share price of £9.10 by Deutsche Bank, in contrast to its current share price of £8.27, as reported by City AM.

"After a substantial increase in share price, the value, in our view, is no longer there," commented Deutsche Bank analyst Robert Noble.

Over the past six months, HSBC's stock price has surged by 33 per cent as the bank committed to achieving $3bn (£2.4bn) in cost savings and restructuring into four new divisions, divided between East and West.

Last week, it emerged that the bank is considering scaling down parts of its investment banking operations across the UK, Europe, and North America. Despite the positive trend in the bank's stock price over the last half-year, analysts are sceptical about further significant gains.

"HSBC doesn’t have to do a lot to maintain a healthy mid-teens ROTE [return on tangible equity] after many years of restructuring."

Noble further stated. "We expect any incremental restructuring will be relatively small and aimed at maintaining ROTE levels against a falling rate environment across a global cost base."

In the meantime, RBC analyst Benjamin Toms has described forecasting HSBC’s financials as "tricky" due to the ongoing cost-cutting and restructuring efforts.

RBC maintains a target price of £9 for the FTSE 100 bank, with a potential high scenario of £9.50 and a low scenario of £6.

Toms has suggested that current analysts' estimates for the bank’s revenue and capital expenditure are overly optimistic, predicting 2025 revenue to be 1.2 per cent below consensus at $64.2bn (£52.1bn).

Toms stated: "Our detailed analysis suggests headwinds from business disposals, capital markets exits, interest rate movement net of hedging are only partially offset by loan growth and fee growth," As global interest rates have started to decline, RBC modelling indicates this will result in a $2.5bn (£2bn) reduction in HSBC’s revenues over the year.