The article "After Earnings" summarizes the latest ratings, target prices, and views from brokerages on BOC Hong Kong after its earnings announcement

BOC Hong Kong (02388.HK) stock price rose, up 5% to HKD 42.58, with an intraday high of HKD 42.84. Citigroup's report indicated that BOC Hong Kong stated at its earnings briefing that its board has in principle approved a three-year shareholder return plan framework, with more details to be disclosed during the first half earnings announcement. The plan will consider various shareholder return options, such as dividend payout ratios, buybacks, and special dividends. The report also noted that BOC Hong Kong's management confirmed limited direct risk exposure to the Middle East region and no direct risk exposure in private credit. Assuming no significant changes in the external environment, it is expected that this year's credit costs will be lower than last year's level of 49 basis points. The robust performance, coupled with net interest income exceeding expectations, should drive upward revisions in market consensus earnings forecasts. Despite impairment losses being higher than market consensus, management remains confident in this year's credit cost guidance amid unclear prospects for commercial real estate asset quality. The bank also believes that BOC Hong Kong's upcoming three-year shareholder return plan should be well-received by investors. The bank maintains a "Buy" rating on BOC Hong Kong with a target price of HKD 47.6.

BOC Hong Kong announced its earnings yesterday, proposing a final dividend of HKD 1.255 per share, bringing the total annual dividend to HKD 2.125 per share, a year-on-year increase of 6.8%. The dividend payout ratio is 56%, up 1 percentage point. BOC Hong Kong's net profit for the last year increased by 4.9% year-on-year to HKD 40.121 billion, with earnings per share of HKD 3.7947. Net operating income before impairment provisions rose by 8.1% year-on-year to HKD 77.019 billion, with net interest income increasing by 1.1% year-on-year to HKD 59.211 billion, and net interest margin falling by 6 basis points to 1.4%. Adjusted net interest margin, accounting for funding income or costs from foreign exchange swap contracts, also fell by 6 basis points year-on-year to 1.58%.

The bank's net provisions for loan and other account impairments increased by 66.8% year-on-year to HKD 8.248 billion. First-stage impairment provisions decreased by HKD 369 million year-on-year to HKD 893 million; second-stage impairment provisions increased by HKD 2.764 billion year-on-year to HKD 3.517 billion, mainly due to the continued weakness in the commercial real estate market, with internal ratings of certain real estate clients declining, leading to an increase in second-stage loan balances by HKD 29.306 billion to HKD 63.628 billion, while a pressure method was used to increase provisions for certain high-risk real estate clients. Third-stage impairment provisions increased by HKD 908 million year-on-year to HKD 3.838 billion, mainly due to declines in collateral valuations or debt restructuring for certain existing non-performing clients.

【Bank of America indicates BOC's attractiveness is inferior to HSBC and Standard Chartered】

Goldman Sachs pointed out that although BOC Hong Kong did not announce the highly anticipated share buyback in its annual results, management indicated that the board has in principle approved the three-year shareholder return plan framework. This framework aims to enhance shareholder returns through increasing the dividend payout ratio and/or conducting share buybacks, but it must await regulatory approval and completion of internal corporate governance procedures before implementation, with details to be announced in the first half earnings. Goldman Sachs believes that this overall is a reasonably performing financial report, although the further delay of the capital return plan is somewhat disappointing The bank raised its net profit forecast for BOC Hong Kong this year by 3.8%, reflecting the higher net interest margin achieved in the second half of last year, as well as the decrease in credit costs due to the cancellation of additional provisions for Vanke (02202.HK) this year. The bank maintains a "Neutral" rating on BOC Hong Kong. The target price has been raised from HKD 43.3 to HKD 44.5.

Bank of America Securities stated that it has raised its earnings forecast for BOC Hong Kong for this year and next year by 5% to 6%, increasing the target price from HKD 38.5 to HKD 40, reiterating a "Neutral" rating, reflecting the weaker attractiveness of BOC Hong Kong's earnings amid economic growth and macro uncertainties regarding provisions. The bank noted that BOC Hong Kong's total dividend yield of 5.4% is on par with major H-share banks but lower than the nearly 10% total return rates of HSBC (00005.HK) and Standard Chartered (02888.HK). The bank also indicated that BOC Hong Kong's strong net interest margin in the fourth quarter of last year may be difficult to sustain, with deposits increasing by 8.1% year-on-year but decreasing by 2.3% quarter-on-quarter. As of the end of last year, the proportion of current and savings deposits fell by 4.5 percentage points quarter-on-quarter to 53.5%. Additionally, the scale of non-performing loans increased by 17.8%, also rising by 10.8% year-on-year. The non-performing loan ratio rose by 18 basis points quarter-on-quarter to 1.14%. The annual total generation rate of non-performing loans increased by 12 basis points year-on-year to 38 basis points. The annual credit cost rose by 20 basis points year-on-year to 49 basis points, and for the fourth quarter of last year alone, it rose to 74 basis points.

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The latest comprehensive investment ratings and target prices from 8 brokerages:

Brokerage│Investment Rating│Target Price

HSBC Global Research│Buy│HKD 49->51

Citi│Buy│HKD 47.6

CICC│Outperform│HKD 29.4->45.1

Goldman Sachs│Neutral│HKD 43.3->44.5

UBS│Neutral│HKD 40->43.5

JP Morgan│Neutral│HKD 43.3

Bank of America Securities│Neutral│HKD 38.5->40

Morgan Stanley│Underweight│HKD 39.7->39.9

Brokerage│Viewpoint

HSBC Global Research│Last year's performance exceeded expectations

Citi│Last year's second-half revenue exceeded expectations, benefiting from net interest income, focusing on shareholder return plans

CICC│Performance is stable, special shareholder returns expected to materialize in the first half of this year

Goldman Sachs│Strong net interest income in the second half of last year and provisions lower than expected

UBS│Post-tax net profit exceeded expectations, benefiting from strong net interest income, credit costs rose as expected

JP Morgan│Operating profit before provisions growth offset by rising credit costs

Bank of America Securities│Strong net interest margin in the fourth quarter offset rising loan provisions

Morgan Stanley│Last year's second-half performance exceeded expectations