JP Morgan: Maintains HSBC HOLDINGS(00005) positive outlook, Hong Kong commercial real estate risks may have peaked.

J.P. Morgan released a research report stating that it maintains a positive outlook on HSBC HOLDINGS (00005). The reason is that a recent financial investigation tour in Hong Kong showed that HSBC's wealth growth is strong and the management believes there is potential synergy with HANG SENG BANK (00011); the operating environment in Hong Kong and the UK is improving, including the recovery of the Hong Kong residential market and market integration in the UK; the commercial real estate situation in Hong Kong has slightly improved. HSBC is rated as "Overweight" with a target price raised from 132 Hong Kong dollars to 138 Hong Kong dollars by December 2026. J.P. Morgan stated that while there are some concerns about the risks in the Chinese commercial real estate market, HSBC's risk exposure in the Chinese commercial real estate market accounts for only 0.7% of its total loan amount, and the Loan Loss Reserve (LLR) is 15%. Therefore, it believes that its profit risk is controllable. Compared to local Hong Kong banks, J.P. Morgan is more optimistic about HSBC and STANCHART (02888). J.P. Morgan believes that the risks in the Hong Kong commercial real estate market may have peaked, with the expected Expected Credit Loss (ECL) for Hong Kong commercial real estate in 2026 possibly lower than in 2025. However, it sees rising risks in the Chinese commercial real estate market and anticipates HSBC will set aside some expected credit loss rates for its exposure in the Chinese commercial real estate market in 2026, therefore maintaining its credit cost assumptions for 45 basis points in 2026 and 2027. J.P. Morgan also raised its earnings per share forecast for HSBC for the fiscal years 2026 and 2027 by 3% to 4%. It forecasts an average tangible equity return rate of 16.6% for the 2025 fiscal year, which is expected to decline to 15.8% in 2026, and to be 15.9% and 15.8% in 2027 and 2028 respectively. However, J.P. Morgan believes that there are upside risks to its forecast.