HSBC Shares Gain as Morgan Stanley Initiates Coverage Ahead of Earnings

HSBC's shares (LON:HSBA) experienced a lift this morning, trading 0.5% higher, and bouyed by the resumption of coverage by Morgan Stanley analyst Alvaro Serrano. The renewed attention comes as the market anticipates the bank's fourth-quarter earnings report.

Serrano initiated coverage with an ‘Equal Weight' rating and a price target of 1,315 GBp. The ‘Equal Weight' rating suggests an expectation that HSBC's stock performance will align with the broader market's returns. This rating, coupled with the price target, indicates a cautiously optimistic outlook for the banking giant, especially as it approaches its Q4 report release.

HSBC has been actively engaged in strategic initiatives designed to bolster shareholder value and streamline its operational efficiency. A notable move was the announcement of a $3 billion share buy-back program in May 2025, slated for completion by July 25, 2025. The buy-back aims to reduce the outstanding ordinary shares, consequently lifting earnings per share and returning capital to shareholders. This program reflects HSBC's confidence in its financial position and its commitment to rewarding investors.

The bank's financial performance has shown positive signs. In February 2025, HSBC reported a significant increase in pre-tax profit for the fourth quarter of 2024, reaching $2.23 billion, a substantial jump from the $977 million recorded in the same period the previous year. This notable improvement was primarily attributed to lower operating expenses, highlighting the effectiveness of the bank's cost management strategies. Further reinforcing this commitment, HSBC unveiled a cost-savings plan targeting $1.5 billion in annualized savings by the end of the following year, aiming to further enhance operational efficiency and profitability.

In April 2025, HSBC itself outlined strategic goals amid prevailing economic uncertainties, targeting a return on average tangible equity in the mid-teens for each year between 2025 and 2027. The bank projected banking net interest income of around $42 billion by 2025, while acknowledging the inherent volatility in interest rate predictions. This forward-looking guidance provides insight into HSBC's ambitions and its awareness of the external factors that could influence its performance.

The current market reaction to Morgan Stanley's coverage initiation underscores a cautiously optimistic outlook for HSBC. Strategic initiatives, such as the share buy-back program and cost-saving measures, likely contribute to positive market sentiment. With HSBC's share price having added 52.45% over the past 12 months, and edging back towards hitting fresh highs, it could take something substantial for bears to shift the narrative here.