Citigroup sticks knife into HSBC

HSBC is incapable of growing fast and is no good at making acquisitions, according to a damning verdict from arch-rival Citigroup.

In a report that pitches America's biggest bank against Britain's biggest bank, Citigroup analysts advised investors to sell their HSBC shares.

HSBC is 'one of the most overvalued banks in Europe', according to Citigroup's highly rated banking team, and the shares were worth only 750p, compared with a current price of 821p.

In effect HSBC was valued £8bn too highly, and was too big and too exposed to slow-growth markets. 'HSBC's ability to grow faster than the economies in which it operates has, in our opinion, essentially collapsed.'

'Put bluntly HSBC has done no more than blow with the wind of economic growth over the past six years,' said London-based analyst Simon Samuels, who has been rated number one in past surveys by Reuters and Extel.

He also said HSBC's 56 recent acquisitions were making a poor return on capital. The return on the $37bn spent on the three biggest, Republic New York, CCF and Household International, was materially below the cost of HSBC's capital, Samuels said. HSBC declined to comment, adding that it was not able to reciprocate because it did not cover American stocks.

But the Citigroup assessment is one of the most extreme. One banker pointed to HSBC's purchase of Midland Bank - which is regarded as one of the most stellar deals in modern banking history.

The rivalry between the two banks has been given a public face as executives stare at each other from their huge new tower blocks at Canary Wharf.