Jefferies: Raising BOC Hong Kong (02388) Target Price to HK$51 to Maintain “Hold” Rating

The Zhitong Finance App learned that the net profit of BOCHK (02388) in the first half of this year rose 7.1% year-on-year to HK$23.7 billion, which is roughly in line with the forecast. Net interest income increased 1% month-on-month, benefiting from stable net interest spreads (1.48%, up 1 basis point from half-year to month) and steady growth in loans (5.9% month-on-month increase). Net fee revenue fell 6% year over year, mainly hampered by insurance (banking insurance commission down 41% year over year) and trust custody services (up 22% year over year), but credit card services (up 12% year over year) and fund distribution (up 55% year over year) showed strong performance. The bank maintained its “hold” rating and the target price was raised from HK$48 to HK$51.

According to the report, operating profit fell moderately by 2.5% year-on-year before provision, due to a rise in the cost-revenue ratio to 22.5%, but net profit benefited from a decline in credit costs (27 basis points, down 12 basis points in half a year) and rebounded. The year-on-year decline in impairment provisions was 25.5%. However, the improvements mainly came from the normalization of preventive provisions in the first and second stages, while the third phase provision was still at a high level. The bank believes that the decline in credit costs is due to a slowdown in risk migration rather than provision for reimbursement, and that overall provision coverage is sufficient.

The Group announced a shareholder return plan for 2026 to 2028, including an orderly increase in the dividend ratio and an additional shareholder return of not less than HK$10.5 billion over three years. A special dividend of HK$0.2388 per share will be paid in 2026. Jefferies believes that the plan is generally in line with expectations, but the amount may fall within the lower limit of market expectations, so there are no surprises.