Investec has upgraded its recommendation for global banking giant HSBC from 'hold' to 'add' after the stock's recent underperformance.

"After RBS (rated 'sell'), HSBC has been the worst performing UK bank year-to-date," according to Investec analyst Ian Gordon.

Including Wednesday's 1.26% gain (to 722p), the stock has risen a total of 11.55% since the start of 2013. This compares with the near-14% rise at Barclays.

Nevertheless, Gordon said he welcomes last week's disposal of HSBC Panama at around three times book value which will result in a $1.4bn pre-tax gain for the loss of just $0.1bn per annum of earnings.

"After 46 disposals/closures in two years with a wide array of balance sheet/income statement effects, net net, we see HSBC edging closer to its 12% return on equity target in 2013e."

Meanwhile, he added that as the GBP/USD exchange rate continues to weaken - while negative for dollar earnings - it is positive for a sterling valuation.

The target price for the stock has been raised from 685p to 735p.

However, the broker pointed out that it still prefers sector peers Barclays and Standard Chartered, both rated 'buy'.

BC

Related share prices
Barclays (BARC) share price
HSBC Holdings (HSBA) share price
Royal Bank of Scotland Group (RBS) share price
Standard Chartered (STAN) share price