BOC HONG KONG(02388) 华泰证券·2024-11-01 03:40Investment Rating - The report maintains a "Buy" rating for Bank of China Hong Kong (2388 HK) with a target price of HKD 31.90 [8]. Core Views - The report highlights a recovery in net interest margins and improvement in non-interest income growth, driven by strategic initiatives and market conditions [2][3][4]. - The bank's asset quality shows slight fluctuations but remains better than the market average, with a non-performing loan ratio of 1.11% as of Q3 2024 [5]. - The report projects a target price-to-book (PB) ratio of 0.95 for 2025, reflecting the bank's strategic depth and expected valuation premium [6]. Summary by Sections Financial Performance - For the first three quarters of 2024, operating income and operating profit before impairment provisions increased by 10.7% and 13.4% year-on-year, respectively [2]. - Interest income grew by 10.4% year-on-year, with a net interest margin of 1.63% as of Q3 2024, showing a slight quarter-on-quarter increase [3]. Asset Quality - The non-performing loan ratio increased by 5 basis points to 1.11% at the end of Q3 2024, indicating some volatility but still outperforming the market average [5]. - The annualized credit cost is reported at 0.26%, reflecting a year-on-year increase of 0.04 percentage points [5]. Non-Interest Income - Non-interest income grew by 45.7% year-on-year in the first three quarters of 2024, with significant contributions from insurance, fund distribution, and foreign exchange trading [4]. - Fee income from loans decreased due to weak credit demand, but other non-interest income sources showed robust growth [4]. Strategic Initiatives - The bank is actively managing its asset-liability structure to capitalize on rising market interest rates and improve bond investment yields [3]. - The bank is also focusing on digital transformation in its Southeast Asia operations, aiming to leverage opportunities from the "Belt and Road" initiative [5]. Valuation Metrics - The projected book value per share (BVPS) for 2024, 2025, and 2026 is HKD 31.90, HKD 33.58, and HKD 35.40, respectively, with corresponding PB ratios of 0.80, 0.76, and 0.72 [6][14]. - The report indicates a dividend yield of 7.25% for 2024, increasing to 7.93% by 2026 [14].