Goldman Sachs: Reiterates BOCHK's (02388) “Buy” Rating to Focus on Capital Reward and Special Dividend Plans

The Zhitong Finance App learned that Goldman Sachs released a research report stating that it reaffirmed the BOCHK (02388) “buy” rating, and that the target price remained at HK$53.3 for 12 months. The bank predicts that BOCHK's net profit for the second quarter will be HK$10.510 billion, up 2% year on year, but down 16% from quarter to quarter; operating profit before provision is expected to drop 4% year on year, down 3% from quarter to HK$15.101 billion.

The bank pointed out that the quarterly decline in earnings in the second quarter was mainly driven by two major factors: the first was the normalization of credit costs, and the ratio of loan provisions to average loans is expected to recover from a very low level of 18 basis points in the first quarter; despite structural improvements in credit trends in the first quarter, the bank took a more cautious view and predicted that credit costs for the full year of fiscal year 2026 would be 29 basis points, considering that management mentioned that there were still sporadic pressure points in the Hong Kong commercial real estate (CRE) portfolio. Second, other non-interest income has been normalized and declined. However, net interest income, net expense income and operating expenses remained stable, supported by a steady three-month Hong Kong Interbank Offered Rate (HIBOR) (up 7 basis points from month to month in the second quarter).

Goldman Sachs expects that at the upcoming second quarter analyst meeting, investors will focus on three aspects: the 2026-2028 capital return plan update. The bank predicts that BOCHK will give back about HK$12.7 billion in capital. If its capital adequacy benchmark is aligned with the Hong Kong banking average, it will release at least 1 percentage point of capital adequacy. It is expected that this portion of capital will be distributed in the form of a special dividend in the three-year capital plan, which is expected to raise the overall dividend ratio from 54% to 56% of the historical 3-year average to 67%, and 2026-8 Dividend ratios are predicted to reach 6.1%, 6.6% and 6.9%, respectively; Hong Kong and Mainland China's commercial real estate risk exposure prospects; and the potential impact of China's new cross-border regulatory regulations, including the specific effects of the recent announcement of measures to deepen financial connectivity between the Mainland and Hong Kong on BOCHK. Goldman Sachs kept BOC Hong Kong's profit forecast unchanged for 2026 to 2028.