UBS Group lowered its earnings forecast for BOC Hong Kong (02388) from 2024 to 2027 by 7% to 14%.
It is reported that according to a research report released by UBS, BOC Hong Kong (02388) is rated as "neutral", because net interest margin is more squeezed than expected, loan demand is soft and the prospect of credit costs is bleak. The earnings forecast for BOC Hong Kong from 2024 to 2027 is reduced by 7% to 14%, and the target price is raised from HKD21.8 to HKD24. The most significant uncertainty is the trend of non-performing loans related to commercial real estate in Hong Kong.
UBS predicts that BOC's operating profit in the second quarter of 2024 will have a moderate increase of 0.6% year-on-year, and the decline in net interest margin is expected to narrow from 7 basis points in the first quarter to 4 basis points in the second quarter, while non-interest income will record a positive growth under the base factor. The bank also expects that the growth of operating expenses will be higher than the 2.9% increase in the first quarter due to the company's continuous investment in technology. UBS does not believe that BOC will distribute special dividends or buy back shares in the near future, but believes that if the dividend payout ratio is significantly increased, it can become a positive catalyst for the stock price.