Zhi Tong Cai Jing·2025-07-31 01:56Core Viewpoint - Citigroup's report indicates that higher-than-expected credit costs may bring short-term uncertainty to Hang Seng Bank (00011), although the HKD 3 billion share buyback is likely to be well-received by the market, with focus shifting to credit cost outlook [1] Financial Performance Summary - Hang Seng Bank's net profit for the first half of 2025 is projected at HKD 6.3 billion, representing a 22% decrease from the previous half and a 35% year-on-year decline [1] - Operating profit is expected to be HKD 8.5 billion, down 16% from the previous half and 25% year-on-year, which is 14% lower than consensus expectations, primarily due to increased provisions [1] - Total revenue is forecasted to decline by 1% from the previous half but increase by 3% year-on-year, exceeding market expectations by 2%, driven by strong non-interest income [1] - Operating expenses are anticipated to be HKD 7.6 billion, down 1% from the previous half and up 1% year-on-year, which is 2% lower than consensus expectations [1] Provision and Credit Cost Analysis - Provision expenses have risen to HKD 4.9 billion, marking a 49% increase from the previous half and a staggering 224% year-on-year increase, mainly due to increased provisions for Hong Kong commercial real estate (CRE) [2] - The expected credit loss (ECL) model adjustments have led to an additional expense of HKD 640 million [2] - The non-performing loan (NPL) ratio has increased by 0.6 percentage points to 6.7% compared to the end of last year, with the NPL ratio for Hong Kong commercial real estate rising by 5 percentage points to 20% [2]