Citi raises target prices for BOC HONG KONG and BANK OF E ASIA, with HSBC HOLDINGS as the top pick

Citigroup published a research report stating that Hong Kong bank stocks will begin to announce their performance for the second half of 2025 in mid-February. The bank expects the performance of local Hong Kong banks to generally meet expectations, as potential revenue upside may be offset by higher impairment expenses.

Citigroup indicated that the normalization of HIBOR will support net interest income in the fourth quarter of 2025, but growth in fee income may slow under high base conditions. The delayed repayment of Vanke (02202.HK) bonds may put pressure on the credit costs of BOC HONG KONG (02388.HK) in the fourth quarter of 2025 and 2026.

Despite local banks having capital ratios at historical highs, Citigroup expects that they will not announce any share buyback plans in their full-year results. Among Hong Kong bank stocks, the bank is more optimistic about international banks, with HSBC HOLDINGS (00005.HK) as its top pick. The bank anticipates that HSBC will release positive messages regarding its 2026 targets, and improvements in non-net interest income are expected to drive profit upside.

Citigroup noted that Hong Kong banks reported historically high capital ratios in the third quarter of 2025, but it expects local banks will not announce any share buyback plans in their full-year results. The bank's model predicts that the full-year dividend payout ratios for BOC HONG KONG and BANK OF E ASIA (00023.HK) will increase by 1 percentage point. Citigroup raised the target price for BOC HONG KONG from HKD 41.3 to HKD 47.6, with a rating of "Buy." The target price for BANK OF E ASIA was raised from HKD 12.6 to HKD 14.9, with a rating of "Neutral."