Citi upgraded the rating of Bank of East Asia to "Buy," citing attractive valuation and raised the target price to HKD 16

Citi published a research report stating that Bank of East Asia (00023.HK) announced its latest strategic guidance at the earnings meeting, aiming to increase its return on equity (ROE) to 7% by 2028, compared to 3.1% in 2025, with market expectations at 5.1%. Key driving factors include expected stable net interest income; a projected annual growth rate of 14% for non-interest income from fiscal years 2025 to 2028; an annual cost increase of less than 5%; and a potential reduction in credit costs to below 60 basis points by fiscal year 2028.

Citi indicated that the dividend target for East Asia in 2028 is double that of 2025, implying that the dividend per share could reach approximately HKD 1.2 by 2028, with a forecasted ROE of 6% at that time, although lower than the management's target, it is still significantly higher than the market's general expectation of 5.1%.

Looking ahead, Citi believes that East Asia's fundamental operating performance can exceed market expectations, and the valuation is also attractive. Having been included in the Hang Seng Composite Index earlier, it means there is a possibility of being included in the Hong Kong Stock Connect in the future. Therefore, it upgraded the investment rating from "Neutral" to "Buy," and raised the target price from HKD 14.9 to HKD 16