Bank of America Securities: Maintaining BOCHK's (02388) “Neutral” rating and HK$51.36 target price performance for the first nine months is in line with expectations

The Zhitong Finance App learned that Bank of America Securities released a research report stating that it will maintain Bank of China Hong Kong (02388)'s “neutral” rating and target price of HK$51.36, and keep the profit forecast unchanged. The company's core profit for the first nine months increased 1% year over year to HK$45 billion, and operating profit increased 3.7% year over year. Both were equivalent to 76% of the bank's forecast for the full year. The results were in line with expectations and reached the annual profit target as planned. The bank believes that the company's fundamentals remain stable, and the predicted dividend rate of 5% to 6% from 2026 to 2027 is still attractive.

The bank pointed out that the performance of BOCHK's core profit and operating profit growth in the first nine months improved slightly compared to the first half of the year, which decreased by 2.5% year-on-year and increased by 0.2%, respectively. On a quarterly basis, adjusted interest spreads fell by 3 basis points, and core profit fell 8%, mainly hampered by weak non-interest income. The company will pay an interim dividend of HK$0.29 per share for the third quarter on November 26, excluding the net date of November 20.

In the third quarter, BOCHK's net interest spread, adjusted for foreign exchange swap costs, fell 3 basis points quarterly to 1.52%. Loans grew 1.5% quarterly and 7.5% year to date; deposit growth was strong, 4.4% quarterly, and 7.6% year to date. The share of current and savings accounts (CASA) increased by 0.5 percentage points quarterly, increased by 1 percentage point to 54.3% year to date, and the loan to deposit ratio decreased by 1.6 percentage points to 58.3% from quarter to quarter.

In terms of revenue, fee revenue fell 7.6% year-on-year in the first nine months, a decline greater than 5.8% in the first half of the year, mainly due to the slowdown in insurance, brokerage and escrow fees. Other non-interest income increased 6.4% year over year, and overall revenue increased 2.3% year over year. Operating costs increased 6.7% year on year during the same period, and the cost to revenue ratio increased 1 percentage point year on year to 23.2% year over year. In terms of asset quality, the non-performing loan ratio increased by 4 basis points quarterly and decreased by 3 basis points year over year to 0.93%.