HSBC a 'buy' but target price under review, says Investec

(ShareCast News) - HSBC delivered a reasonable performance on costs in the last quarter of the year, but the weaker outlook for revenues led Investec's Ian Gordon to tell clients he hoped "fresh cost reduction initiatives" would go beyond existing targets.Underlying costs for the last quarter of 2015 of $10bn were 1% better than consensus, but the weaker prospects for revenues meant the lender would not meet its target for returns on equity of above 10% by 2018 without fresh cost-cutting measures, the analyst explained.HSBC reported pre-tax profit of $18.9bn for the year to 31 December 2015, up from $18.7bn in 2014 but below forecasts of $21.8bn.Adjusted revenue rose 1% to $57.8bn from $57.2bn in 2014, with growth in Global Banking & Markets, Commercial Banking and Principal Retail Banking and Wealth Management.However, fourth quarter revenues missed analysts' forecasts by $1.1bn; with a "reasonably resilient" performance in GB&M offset by softer retail revenues, particularly in Asia.HSBC also booked $0.8bn more in provisions in the last three months of 2015, driven mainly by oil and gas and commodities-related exposures.Gordon added: "The $1.5bn UK bank levy charged in Q4 2015 offers a reminder of why we believe HSBC was mistaken in its decision last week to retain its UK domicile."On a more positive note, HSBC did raise its so-called common equity Tier 1 capital ratio from 11.8% in the third quarter to 11.9% in the fourth quarter.It also raised its dividend payout for the last quarter of the year to 21 cents, giving it an actual yield of 7.9%, the analyst concluded.Investec stuck to its 'buy' recommendation on shares of HSBC but placed its target price under review.Shares fell 3.28% to 435.20p at 1001 GMT.