We Increase FVE for Hang Seng Bank on Better Net Interest Margin in the Medium Term

Ahead of the first-half result, we lift Hang Seng Bank’s fair value estimate by 6.5% to HKD 163 per share, as we factor in a higher net interest margin, or NIM, in 2024 and 2025. With the bank previously announcing a first-quarter dividend of HKD 1.10 per share, compared with HKD 0.80 per share in the second and third quarter of last year, we lift our full-year dividend payout to 65% from 60% and forecast a dividend of HKD 6.31 per share, an increase from HKD 5.83 per share previously. The bank’s Pillar 3 statement for the first quarter showed a slight decline in risk-weighted assets, but this is mainly due to a lower debt securities balance. There is no change to the bank’s strong capital position, with the common equity Tier 1 ratio at 16.6%, as of March 31, 2021. Its liquidity position is also solid with the liquidity coverage ratio and net stable funding ratio both well above 100%.