Citi cuts HSBC to neutral, citing near-term earnings hit from investments

Morgan Stanley expects Bank of Korea rate at 3.5% by 1Q 2027

Analysts published a fresh round of notes Wednesday on banks and insurers across Asia and Europe, with Citi downgrading HSBC Holdings and other research desks adjusting forecasts and target prices.

Citi downgraded HSBC Holdings to neutral from buy, saying the London-based bank’s planned investments will hit earnings in the near term and support revenue growth only in the long term. Citi cut HSBC’s underlying earnings-per-share forecasts for 2026 through 2028 by up to 3%, citing higher costs combined with lower 2026 buybacks than expected. HSBC’s asset sales could weigh slightly on revenue growth in the near term, and its focus on volume growth might limit near-term buybacks, the analysts said. HSBC shares in London were down 1.9% at 15.54 pounds, having rallied 35% since the start of 2026.

Morningstar analyst Kathy Chan said HSBC is likely to benefit from Asia’s structural wealth momentum, which should serve as a driver of long-term growth for the lender. HSBC, which makes most of its profit in Asia, is one of the region’s leading wealth managers, Chan said in a note. She expects the lender to post average revenue growth of 6% over 2026-2030, supported by its increasing assets under management. Morningstar retains a fair-value estimate of HK$158 and 1,490 pence on HSBC’s Hong Kong and London shares, respectively. HSBC shares fell 1.4% in Hong Kong to HK$164.20 and closed 0.8% lower in London at 1,584.60 pence.

Morgan Stanley economist Kathleen Oh said the Bank of Korea’s rate-hike cycle could proceed faster than previously expected as South Korea’s economic fundamentals strengthen. Oh expects the central bank to raise its policy rate to 3.5% by the first quarter of 2027, earlier than her previous forecasts. Both tech and non-tech exports are likely to continue accelerating, while consumption is expected to recover rapidly on improving household income and fiscal support, she said. Demand-driven price pressure is likely to keep core inflation elevated, she added. Morgan Stanley raised its 2026 growth forecast for South Korea to 3.4% from 2.8% and its 2027 forecast to 2.7% from 2.3%.

United Overseas Bank’s sale of UOB Asset Management to Allianz Global Investors could boost its 2026 dividend yield, Macquarie Capital’s Jayden Vantarakis said in a note. The deal to sell the unit for 555 million Singapore dollars comes after the lender moved to divest its interests in two real-estate sites. Vantarakis estimated the sale could add roughly 0.3% to UOB’s 2026 dividend yield, assuming its gain of S$330 million flows through to earnings and UOB’s 50% payout policy. UOB continues to hold stakes in listed affiliates, which could unlock further gains if sold, he added. Macquarie retains its outperform rating and S$45.16 target price on UOB, which was down 0.7% at S$42.94.

J.P. Morgan analysts said Hiscox’s momentum might be improving, and the insurer could achieve its medium-term retail growth target a year early. Hiscox reported retail growth of 8.2% for the first half, above the 8% growth target it had originally set for 2026, which has been upgraded to 9%. The new 2026 target suggests retail growth will be at or very close to double-digit in the second half, J.P. Morgan said. The analysts wrote that Hiscox had originally aimed to achieve double-digit growth in its retail business by 2028, and that sustained momentum through 2027 points to the target being achieved a year early. Middle East claims were far larger than expected in the first half, they added. Hiscox shares were up 1.6% in London.

Legal & General posted mixed results across its key reporting lines, with volume pressure remaining a risk to earnings in its institutional retirement unit, RBC Capital Markets analyst Ben Cohen said in a research note. Cohen said L&G’s ability to grow volumes without compromising on returns remains a key question, along with the source of its raised guidance for its management actions unit. “Overall, we see the release as neutral to slightly positive,” he added. Shares in the British provider of life insurance, pensions, retirement and investment services traded 0.3% higher at 303.7 pence.

UBS analysts kept an unchanged neutral rating on Pinnacle Investment Management after its fiscal 2026 result, telling clients that June-quarter net flows and fiscal year-end funds under management were stronger than expected. That strength is offset by what they said is a material 25% miss on their forecast for second-half net profit. They lowered their forecast for fiscal 2027 earnings per share by 3%, while leaving their target price of 18.00 Australian dollars unchanged. Shares were up 6.5% at A$18.92.

In a separate note, an analyst at Macquarie kept an outperform rating on Pinnacle, writing that there is upside risk from funds under management, flows, fee rates and operating margins. Funds-under-management growth was excellent at five of ASX-listed Pinnacle’s affiliates, which represent about 65% of the group’s total funds under management, the analyst wrote, adding that there is still scope for potential accretive M&A activity. Macquarie trimmed its target price 4.6% to 23.95 Australian dollars. Shares were up 8.9% at A$19.34.

Jefferies analyst Andrew Lyons expects Judo Capital’s path toward self-funding growth to be tested in the company’s current fiscal year. Lyons expects the Australian business lender’s profit for its most recent fiscal year, which ended June 30, to be at the bottom of the ASX-listed company’s guidance range. Asset-quality concerns, worsening deposit conditions, and the sustainability of recent efficiency gains are set to make fiscal 2027 a challenging period, he told clients. Lyons expects Judo to report a 20 basis-point expansion in its fiscal 2026 net interest margin, and forecasts a 1-basis-point contraction in fiscal 2027. Jefferies keeps a buy rating on the stock and raised its target price 3.0% to 1.69 Australian dollars. Shares were up 2.2% at A$1.0475.

In a separate note, Jefferies said investors in Bendigo & Adelaide Bank are likely to focus on the trade-off between growth, margins and capital when the lender reports its fiscal 2026 result on Aug. 24. “Key issues include the sustainability of business lending growth, FY27 margin drivers, agri credit quality and whether surplus capital can help close the gap to management’s more than 10% return on equity target,” analyst Andrew Lyons said. Jefferies expects Bendigo to achieve a second-half net interest margin of 1.97%, up 6 basis points on the first half, and forecasts fiscal 2026 expense growth of 5%, implying second-half growth of 3%. Bendigo’s dividend is likely to be flat at A$0.33 a share, and cash earnings could total A$518 million, up 1% on the year.