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HSBC 'Best Counterparty in Global Banking Today': Bernstein

NEW YORK ( TheStreet) -- HSBC Holdings PLC (HBC) looks like quite a dividend play for investors, and BernsteinResearch also sees 17% upside for the company's shares.

American Depositary Shares of HSBC closed at $57.00 Tuesday, returning 7% this year, following a 48% return during 2012, when the company made a major move to pull out of the U.S. market, completing the sale of roughly 200 branches in upstate New York to First Niagara Financial Group (FNFG) and other banks, and also selling its entire U.S. credit card portfolio to Capital One Financial (COF).

Remaining U.S. loans have been placed in run-off and HSBC's impaired North American assets fell by 26% during the first quarter from the fourth quarter, to $447 million as of March 31. "This raises the potential for early repatriation of the excess capital stuck in the U.S.," Bernstein analyst Chirantan Barua wrote in a report to clients on Tuesday.

Barua added that "the bank can increase its dividend at least 30% this year given the fact that it has already met its high capital requirements and this would prove to be a strong catalyst for the stock."

That would be quite a significant event for investors, considering that HSBC's shares already have a dividend yield of slightly over 4%.

HSBC is headquartered in London. The company had $2.7 trillion in total assets as of March 31 and on Tuesday reported first-quarter earnings of $8.434 billion, increasing from $4.322 billion during the first quarter of 2012. According to Barua, the first-quarter profit before taxes and one-time items was "9% ahead of consensus expectations. The beat against consensus was primarily driven by 38% lower than expected impairments and 4% lower than expected operating expenses."

HSBC's first-quarter return on average equity was a solid 14.9%, improving from 6.4% a year earlier.

"Across all lines, we see these results as an endorsement of the strength of the franchise and its ability to generate earnings even in a sluggish macro environment," Barua wrote, adding "We see HSBC as the best Counterparty in global banking today with further upside potential as growth comes back and rates rise."
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