FEARS of rising bad debts in the United States knocked shares in HSBC, as one City broker reduced its stance on the banking group.
Analysts at Goldman Sachs cut their “outperform” rating to “inline”, citing fears that trends seen in Citigroup’s fourth- quarter numbers last week could be echoed by its British-listed rival.
The cut was also a reaction to a recent recovery in HSBC’s share price, which has risen 8 per cent since October.
Citigroup disappointed Wall Street on Friday after reporting that revenues from its American credit card business had slumped 22 per cent to $2.7 billion (£1.5 billion), compared with the fourth quarter of 2004, amid pressure from a significant increase in bankruptcy filings.
Analysts said that HSBC would face pressure on profit margins in its credit card and consumer lending businesses, with an expected weakening of demand for consumer credit.
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Goldman Sachs trimmed its earnings per share forecasts by 1.5 per cent for 2005, noting the group’s lower exposure to North America — expected to account for 32 per cent of 2005 full-year profits — and strong exposure to Asia. The shares ended 12p lower at 931p.
HSBC’s weakness was accompanied by falls elsewhere, with Standard Chartered 23p lower at £13.74 and Royal Bank of Scotland off 3p at £17.33.
The FTSE 100 fell as much as 47 points in early trade, after poor US corporate earnings figures left the Dow Jones industrial average down 213.32 points at 10,667.39 on Friday. Yesterday’s positive start on Wall Street, however, saw the FTSE 100 index close down 11.5 points at 5,660.9.
PartyGaming was the largest blue-chip faller as the internet gaming group was hit by profit-taking before its fourth-quarter update, due on Friday. The shares, which hit a recent peak of 154p last Tuesday, have had a good run of late on talk that this week’s numbers will beat forecasts. They ended down 2¾p at 140p.
Vodafone showed signs of recovery, putting on 3p to 121p before today’s fourth-quarter subscriber data numbers. The rise comes on the back of reports that shareholders are calling on Arun Sarin, chief executive, to offload the mobile phone group’s 45 per cent stake in Verizon Wireless, the American mobile group, thought by analysts to be worth about £25 billion. However, the improvement comes after last week’s 6.3 per cent fall and against the backdrop of a 22 per cent slide since November.
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O2, a rival mobile phone group, also found buyers, adding ½p to 199¾p, on upbeat subscriber data. BT shares, which came under pressure this month with France Télécom’s profits warning, put on 3½p to 207¼p.
Continuing speculation of Gazprom’s interest in a possible offer for Centrica gave the utility group a further boost, adding 1¾p to 265p. Schroders, the fund manager, had the best blue-chip performance, rising 40½p to £10.65½. The group confirmed after the end of trading that it had bought back 20,000 shares for cancellation.