HSBC Holdings: NIM – Decade Long Decline

An Investec analyst reaffirmed his Buy rating on HSBC Holdings plc (ADR) (NYSE:HSBC) (LON:HSBA), as he believes the bank will witness receding headwinds going forward.

Ian Gordon of Investec has pegged HSBC's target price at 745p using RoE/CoE-g methodology.

NIM – Decade long decline

Thanks to run-off of high margin/low quality business in North America, strategic disposals and the impact of near-zero interest rates for a deposit-rich bank, HSBC Holdings plc (ADR) (NYSE:HSBC) (LON:HSBA) reported a decade-long decline in the Net Interest Margin. This can be evidenced from the following graph:

However, the Investec analyst believes these headwinds should significantly abate in 2014e and beyond, thanks to lower...