European Banking Weekly Notes: HSBC, Barclays and Deutsche Bank

European bank shares saw an overall uptick in prices last week as the strong gains at the beginning of the week were only partially eroded by the end of the period. While Greece’s debt worries remained the single biggest driver of prices across sectors, share prices also benefited from favorable exchange rate movements.

The banking sector-specific STOXX Europe 600 Banks gained 2.6% over the week – outperforming its multi-industry equivalent, the STOXX Europe 600 index which gained 1.2%.

HSBC

HSBC (NYSE:HSBC) announced its decision to end its marketing tie-up with Markit last week. ^[1] The partnership had been formed five years ago, and covers several indexes that monitor developing nations – including the closely-followed China Purchasing Managers Index (PMI). While neither of the companies provided a reason for the move, HSBC’s need to distance itself from the China PMI figure (which often contradicts official numbers) was likely an important factor. The end of the partnership should also help HSBC cut down on its marketing expenses.

• Trefis has a $53 price estimate for HSBC’s shares, translating into a $204 billion market cap. This is roughly 15% ahead of the market price of around $47 seen over the week
• We estimate the company’s FY 2015 revenues to be around $65 billion for an earnings per share of $0.91, compared to a consensus of $0.84 according to Reuters

See our full analysis for HSBC

Barclays

Barclays (NYSE:BCS) is selling is private equity arm, Barclays Natural Resources Investment, to the unit’s management after attempts at a sale to external buyers failed. ^[2] The unit has 14 employees and handles roughly $3 billion in investments. With regulatory requirements forcing banks to cut their exposure in the private equity business, Barclays has already sold a bulk of its private equity operations over recent years.

• Trefis has a $17.50 price estimate for Barclays’ shares, translating into a $72 billion market cap. This is slightly ahead of the current market price of around $17 seen over the week.
• We estimate the company’s FY 2015 revenues to be $45 billion for an earnings per share of $0.89, compared to a consensus of $0.87 according to Reuters

See our full analysis for Barclays

Deutsche Bank

Deutsche Bank is looking to cut as many as 100 jobs across its Russian operations in response to slowing economic conditions in the country – a sizable chunk of the roughly 1,300 employees the bank has in the country. ^[3] High interest rates coupled with international sanctions and low prices of crude oil have hurt profitability across divisions for the German banking giant. The move should help Deutsche Bank take a step towards achieving its long-term cost cutting goal.

• Trefis has a $37 price estimate for Deutsche Bank’s shares, translating into a $51 billion market cap. This is about 15% ahead of the market price between $32 seen over the week.
• We estimate the company’s FY 2015 revenues to be $44.5 billion for an earnings per share of $3.27, compared to a consensus of $2.79 according to Reuters

See our full analysis for Deutsche Bank

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1. HSBC ends marketing tie-up with Markit for PMI indices, Reuters, Jun 26 2015 [↩]
2. Management to buy Barclays private equity arm after stalled sale, Financial Times, Jun 23 2015 [↩]
3. Deutsche Bank Said to Consider Cutting About 100 Jobs in Russia, Bloomberg, Jun 26 2015 [↩]