Berenberg highlights an 'unrewarded transformation' at HSBC

Berenberg has maintained its 'buy' rating on global banking group HSBC, saying that its transformation has gone unrewarded by the market."We believe HSBC has transformed itself into a bank that is comparable to the one that outperformed its peers and the market between 1992 and 2003. "This appears to have been ignored by the market, with HSBC trading at a 15-year relative low to the UK market and at a 10% valuation discount to the European banks, a 13-year low," the broker said.It said that a "change of focus" at HSBC should allow the stock's valuation to return to at least a 15% premium to its European banking peers, offering 30% upside to its 790p target price.Berenberg said a simplified structure at the bank "should allow better control and focus on risk" and this will be the biggest driver of the stock's outperformance."HSBC is one of the few banks to focus on risk-adjusted return targets and recognise the inherent issues in being too big to manage. This focused risk appetite has been supported with a repositioning of the book towards secured lending and writing 90% of new business with existing customers." The stock was trading 0.75% higher at 601.7p by 09:41 on Friday.BC