BOC Hong Kong’s First-Half Result Within Expectations

The underlying trends in BOC Hong Kong’s first-half results were generally within our expectations. First-half net operating income before impairment allowances increased 8.7% year on year, mainly driven by an increase in net interest income of the same magnitude, benefiting from the rising interest rate environment. Loan growth was strong at close to 5% against the end of 2021, compared with system loan growth of 0.8%, and net interest margin, or NIM, also improved. However, higher net interest income was partly offset by a 23% decrease in net fee income due to weaker investor sentiment and the fifth wave of COVID-19 in Hong Kong. The key negative was a deterioration in asset quality, with the nonperforming loan, or NPL, ratio increasing to 0.46% from 0.27% as of end 2021. However, we believe this is manageable as the bank’s provisioning level remains high. The interim dividend of HKD 0.447 per share is unchanged from the same period last year, representing a dividend payout ratio of 50%, in the middle of a target payout of 40% to 60%.