HSBC share price moves higher in February ahead of full-year results

HSBC has seen its share price climb more than 6% since early February, regaining some of the losses it sustained in January.

The recent rally has been supported by analysts from Credit Suisse opting to back the stock as its top pick among UK banks in 2020, with its full-year (FY) results around the corner (18 February).

The Swiss bank upgraded its rating for the stock to ‘outperform’ in February, stating that the lender was at a ‘pivotal stage, with all the pieces in place to make Strategy 2020 a success’.

‘Our detailed review of HSBC's cost base leads us to conclude that management has yet to address the structural inefficiencies within the group,’ HSBC analyst Claire Kane said.

‘This presents a key opportunity for the new management team to drive return on tangible equity above 11% by the 2022 FY, leading to a re-rating of the shares.’

Credit Suisse and other analysts are expecting HSBC to unveil an ambitious cost-cutting programme in its FY results next week targeting savings of around $6 billion by 2020. To achieve this, HSBC is likely to announce further job cuts as part of a major restructuring plan.

‘We forecast net cost savings to come principally from the UK head office, which we estimate increased by around 30% during Strategy 2015,’ said Kane. ‘A reduction in management layers and back-office personnel should limit the revenue loss relative to the previous restructuring.’

HSBC: technical analysis

HSBC shares have enjoyed a relatively buoyant start to February, with the stock regaining much of the ground lost in January.

However, this fails to mask the wider declines we have seen for this bank, with the stock trading 17% off the £7.09 highs seen two years ago, according to senior market analyst Josh Mahony.

‘There could be some hope through, with the rally taking us within touching distance of the crucial £6.03 swing high from December,’ Mahony said. ‘A break through that level would bring about a more bullish outlook, yet there are distinct risks that remain until that happens.’

‘The creation of lower highs in play throughout the past nine months points towards a high likeliness of further downside from here, with trendline resistance coming into play,’ he added.

‘With that in mind, the downtrend looks likely to continue following this pullback, with a rise through £6.03 required to negate this outlook.’

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The hourly time frame provides a more granular look at the stock, with the price having dropped out of an ascending channel.

Trendline support has now turned into resistance, with the price likely to turn lower from here. Watch for a decline through the £5.84 support level to bring about a short-term bearish confirmation signal.

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