European Banking Notes: HSBC, Credit Suisse and UBS

September 8th, 2015 by Trefis Team
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European bank shares lost a considerable amount of value yet again last week, making it the third consecutive weekly decline for them. The trend is largely in line with what has been witnessed across sectors, with concerns about a slowdown in China figuring high on investors minds’ over recent weeks. This, coupled with lukewarm economic indicators for the Eurozone, has triggered sharp sell-offs in equity markets around the globe.

The banking sector-specific STOXX Europe 600 Banks index lost almost 5% over the week – underperforming its multi-industry equivalent, the STOXX Europe 600 index which shed 3.6% over the same period.

HSBC

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The ongoing talks between HSBC (NYSE:HSBC) and ING for the sale of the former’s retail banking operations in Turkey are likely to be stalled for a couple of months and could potentially fall apart due to the country’s economic and political instability of late. [1] The diversified banking group had announced the sale of the unit as a part of its large-scale reorganization plan in June, and had zeroed in on the Dutch bank as a potential buyer within weeks. [2] HSBC reported slightly less than $8.6 billion in gross outstanding loans in Turkey at the end of 2014, with total assets of roughly $15 billion.

  • Trefis has a $53 price estimate for HSBC’s shares, translating into a $207 billion market cap. This is roughly 35% ahead of the market price of $38-39 seen over the week
  • We estimate the company’s FY 2015 revenues to be around $63 billion for an earnings per share of $4.19, compared to a consensus of $4.15, according to Reuters

See our full analysis for HSBC

Credit Suisse

Credit Suisse (NYSE:CS) lost its legal battle with Highland Capital Management late last week, with a U.S. district court ordering the second largest Swiss bank to pay almost $300 million to the hedge fund firm over loans that went bad in 2008. [3] The lawsuit is one of several filed by Highland against Credit Suisse over loans handed out by the bank to luxury real estate developers in the run-up to the recession. The bank is expected to appeal against the decision soon.

  • Trefis has a $27 price estimate for Credit Suisse’s shares, translating into a $44 billion market cap. This is around the market price seen over the week.
  • We estimate the company’s FY 2015 revenues to be $28 billion for an earnings per share of $2.97, compared to a consensus of $2.35 according to Reuters

See our full analysis for Credit Suisse

UBS

UBS (NYSE:UBS) is looking to set up an alliance with buy side firms, regulators and market structure providers to settle financial transactions worldwide using blockchain technology. [4] The largest Swiss bank established a cryptocurrency lab in London this April and has been overseeing several blockchain projects since then. [5] UBS is working on the proposed digital coin along with ClearMatics, and if successfully implemented, the technology can reduce global settlement times for certain securities from 2-3 days to just a few seconds. [6]

  • Trefis has a $25 price estimate for UBS’s shares, translating into a $92 billion market cap. This is about 25% above the market price of around $20 seen over the week
  • We estimate the company’s FY 2015 revenues to be around $33 billion for an earnings per share of $1.59, compared to a consensus of $1.45 according to Reuters

See our full analysis for UBS

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Notes:
  1. HSBC Turkey Sale to ING Said to Stall on Market, Political Risks, Bloomberg, Sep 2 2015 [↩]
  2. ING on course to win auction for HSBC’s Turkish bank, Reuters, Jul 2 2015 [↩]
  3. Judge Orders Credit Suisse to Pay Highland $287.5 Million in Suit Over Loan, The Wall Street Journal, Sep 4 2015 [↩]
  4. UBS looks to build ‘settlement coin’ alliance, Financial News, Sep 3 2015 [↩]
  5. UBS to Research Blockchain Technology in London Lab, CoinDesk, Apr 2 2015 [↩]
  6. UBS Develops ‘Settlement Coin,’ Bringing Block Chain to Financial Markets, Crytocoinnews.com, Sep 7 2015 [↩]