According to Citigroup in "The Big Banks," BOC HONG KONG has a relatively large exposure to Vanke's debt risk

Citi published a research report indicating that Vanke (02202.HK) is seeking to extend the maturity of its RMB 2 billion medium-term notes due next month, marking the company's first request for an extension on publicly traded bonds. The event is expected to have a negative impact on short-term sentiment in the real estate sector. Compared to other Hong Kong banks, it is believed that BOC HONG KONG (02388.HK) may have a relatively larger exposure to Vanke's debt risk.

The report cites LSEG data indicating that the total commitment of BOC HONG KONG's syndicated loans is approximately HKD 3.8 billion, accounting for 0.22% of total loans. Although the actual exposure may differ from the original loan commitments, it is estimated that under assumptions of 30%, 50%, or 70% provisioning coverage, the impact on its credit costs would be 7, 11, and 16 basis points, respectively.

However, considering that BOC HONG KONG's pre-tax profit growth this year has shown resilience, it may help offset credit cost pressures. Additionally, as of the third quarter, the CET1 ratio remains above 24%, reflecting limited downward space for capital returns. Citi has raised its credit cost forecasts for BOC HONG KONG for the fiscal years 2025 to 2027 to 44, 40, and 30 basis points, respectively. The earnings per share forecast for 2025 remains roughly unchanged, while the earnings per share forecast for 2026 has been lowered by 2%. The target price has been reduced from HKD 42.3 to HKD 41.3, maintaining a "Buy" rating