The Zhitong Finance App learned that Morgan Stanley released a research report saying that Jefferies published a research report stating that the Bank of East Asia (00023)'s net interest income is at risk of a marginal decline, especially in its business in China. Although non-performing loans are still relatively limited, commercial real estate in Hong Kong is receiving increasing attention; an unfavorable macro environment may delay the improvement of shareholders' return on equity. The report gave East Asia a “buy” rating, but the target price was lowered from HK$12 to HK$11.5.
The bank pointed out that the Bank of East Asia's net interest spread may have peaked in the fourth quarter of last year and continued to slow in the first and second quarters of this year. The bank can hedge interest rates over a long period of time to maintain the level of net spreads in the Hong Kong market, but the options in the Chinese market are relatively limited. Net interest income is expected to drop slightly by 2% this year due to slowing loan growth and shrinking net spreads.
According to the report, in view of the weak Hong Kong interbank interest rate (HIBOR) and the deterioration of Hong Kong's macroeconomic economy, local banks in Hong Kong are cautious. It was previously suggested that Hang Seng Bank (00011) has a decline in net interest income and provision risks. It is more optimistic about international banks and the Bank of Singapore because their risk exposure is more diversified and the non-guaranteed business is stronger.