Bank of America Securities: Raising BOCHK (02388) Target Price to HK$51.36 to Maintain “Neutral” Rating

The Zhitong Finance App learned that Bank of America Securities released a research report stating that it raised the target price of BOCHK Hong Kong (02388) from HK$50.25 to HK$51.36, maintaining a “neutral” rating. Bank of America raised its 2026-2028 profit forecast by 0.5% to 2.5% to reflect performance and shareholder return plans. However, Bank of America believes that the Bank of China Hong Kong's predicted dividend rate of about 5% to 6% from 2026 to 2027 is still unattractive. According to Bank of America Securities, profit attributable to BOC Hong Kong shareholders in the first half of the year increased 7.1% year over year to HK$23.739 billion, and operating profit before provision fell 2.5% year on year to HK$30.23 billion, mainly driven by reduced provisions and revaluation income from investment properties.

According to the report, BOCHK's adjusted net interest spread fell 4 basis points quarterly to 1.55% in the second quarter, and adjusted net interest income for the first half of the year increased 3.5% year-on-year. Loans increased 5.9% month-on-month, deposits increased 3.4% month-on-month, and the share of current and savings deposits rose slightly by 0.3 percentage points to 53.8%. Net expense revenue fell 5.8% year-on-year, hampered by a decline in income from insurance and fiduciary services. The cost-revenue ratio increased 1.5 percentage points year-on-year to 22.5% in the first half of the year.

In terms of asset quality, the impairment loan ratio fell 25 basis points month-on-month to 0.89%, and credit costs fell 31 basis points to 27 basis points month-on-month. Management expects credit costs to slow further in the second half of the year if the global economy and property market stabilize. The Board approved the three-year shareholder return plan for 2026 to 2028, including an orderly increase in the regular 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, which is equivalent to an additional 47 basis points of yield in 2026.