HSBC estimated that the bank's Basel III Tier 1 common equity ratio would be a strong 10.1%, "after planned management actions." The company reported a core Tier 1 capital ratio of 12.7%, increasing from 12.3% the previous quarter, "as a result of the completion of management actions and profit generation offset by the effect of regulatory changes."
The company also said "internal capital generation contributed US$3.0bn to core tier 1 capital, being profits attributable to shareholders of the parent company after a regulatory adjustment for own credit spread and net of dividends," although "this was largely offset by foreign currency translation differences resulting from the strengthening of the US dollar."
HSCB CEO Stuart Gulliver said in the company's earnings announcement that "we have strengthened our capital position and remain one of the best-capitalised banks in the world, allowing us both to invest in organic growth and grow dividends. Our strategic direction remains unchanged. Later this month we will update investors on the next phase of its implementation."
Barua's price target for HSBC's American Depositary Shares is $64.93. The analyst estimates rates the company "outperform," and estimates the bank will earn $7.49 a share for all of 2013, with EPS increasing to $8.36 in 2014.
"Our fundamental long view on HSBC has been based on its unique strategic position of being the only global bank with a strong counterparty rating and strong liquidity both in emerging and developed markets," Barua wrote.
The analyst added that "most importantly HSBC today is generating significant levels of cash that it cannot deploy within its risk appetite given the macro environment. Given the fact that the bank has already met its high regulatory capital hurdle, a natural return of cash to shareholders is due. "
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-- Written by Philip van Doorn in Jupiter, Fla.