BANK OF E ASIA(HK:00023) Ge Long Hui·2025-08-23 11:46Core Viewpoint - The performance of East Asia Bank in 1H25 showed a decline in operating income but an increase in net profit, primarily due to lower impairment losses [1][2]. Financial Performance - 1H25 operating income decreased by 2.1% year-on-year, aligning with expectations, mainly due to the decline in HIBOR compressing interest margin [1]. - 1H25 net profit attributable to ordinary shareholders increased by 24.7% year-on-year, outperforming expectations due to reduced impairment losses [1]. - Net interest income in 1H25 fell by 10.7% year-on-year and 11.5% quarter-on-quarter, slightly more than peers, due to concentrated credit exposure in Hong Kong and mainland China [1]. - Non-interest income showed strong performance, with other non-interest income up by 50.5% year-on-year, driven by foreign exchange gains; fee income reached HKD 1.65 billion, up 16.6% year-on-year, benefiting from high demand in cross-border wealth management [1][2]. Customer Growth and Credit Costs - The number of customers from mainland China increased by 62% year-on-year, and customers from Hong Kong increased by 54%, leading to a 285% year-on-year growth in retail banking fee income [2]. - Credit costs have decreased from high levels, contributing to the better-than-expected net profit; 1H25 provisioning decreased by 11.9% year-on-year and 2.9% quarter-on-quarter [2]. - The non-performing loan (NPL) ratio decreased by 9 basis points to 2.63%, while the provisioning coverage ratio slightly declined to 37.3% [2]. Outlook and Valuation - The company maintains a cautious outlook on credit costs, expecting levels in 2H25 to not be lower than those in 1H25 (0.95%) and for the full year 2025 to be no lower than 2024 (1.03%) [2]. - The target price has been raised by 25% to HKD 14.12, reflecting a 4.4% upside potential, with the company currently trading at 0.4X 2025E/2026E P/B [2].