Broker tips: HSBC, Vistry

(Sharecast News) - Analysts at RBC Capital Markets raised their target price on banking giant HSBC from 1,200p to 1,275p on Thursday following the group's first quarter results a day earlier. RBC Capital said HSBC's FY27 adjusted pre-tax profit estimates had increased by 6%, driven by higher banking net interest income and other income, which was partially offset by higher operating expenses.

On a divisional basis, RBC said the increase was driven by corporate and investment banking, as well as its International Wealth and Premier Banking unit and the firm's performance in Hong Kong. It also noted that HSBC's lower UK contribution could be explained by lower net interest margin expansion and the negative impact from the restatement.

"We model banking NII of $46.5bn/$48.5bn/$49.8bn in FY26E/27E/28E, respectively (guidance FY26 c.$46bn). For costs, we model underlying growth of 0.9%/2.0%/1.7% in FY26E/27E/FY28E, respectively (guidance FY26 c.1%)," said RBC, which has a 'sector perform' rating on the stock.

"We model cost of risk of 45bps in FY26 (guidance c.45bps), coming down to 38bps in FY27-28E, towards the top end of management's through-thecycle 30-40bps target range. This leads us to an ROTE ex notable items estimate of 18.3%/19.0%/19.4% in FY26E/27E/28E, which compares to management's guidance of '17% or better' in FY26-28E."

Berenberg slashed its target price on house builder Vistry fom 500p to 340p on Thursday following the group's AGM trading update a day earlier.

Despite an "optically attractive valuation", Berenberg said it remains 'neutral' on Vistry. From a trading perspective, it thinks all three of Vistry's core customer groups - social housing providers, private institutional capital and open market customers - remain in "a challenged position for differing reasons".

"With a need to optimise cash generation - given the debt position - the group is adopting a strategy of incentives and discounts to drive sales activity, which may be aiding cash flow but at the cost of margin. It is hard to see any cause for optimism in the near term," said Berenberg.

The German bank also pointed out that in "a somewhat mixed message", Vistry had referred to the "excellent progress" being made by the group to increase open market sales rates, which were up 32% year-to-date, but also noted that this was driven by "increased incentives and discounts", which aides cash flow but negatively impacts margins. Vistry also said transaction activity with its social housing partners had been "relatively subdued" due to ongoing funding issues.

Compared to previous guidance for improved pre-tax profits, Vistry now expects PBT to be around the middle of consensus range, which would imply PBT of roughly £226m, down 16% year-on-year.

"We cut our PBT forecast, which now stands in line with the new company guidance. Vistry also guides for net cash over GBP100m at year end (although it adds that average net debt in H1 will be higher than last year) as it has launched," added Berenberg.

Reporting by Iain Gilbert at Sharecast.com