We Cut Our FVE for Hang Seng Bank to HKD 148 From HKD 177; China Property Costs May Linger Awhile

We maintain our narrow moat rating for Hang Seng Bank and reduce our fair value estimate to HKD 148 from HKD 177, equivalent to 1.78 times book value as of the end of 2022 and 12% above the current share price, upon change of coverage analyst. We continue to view Hang Seng Bank as deserving of its Exemplary capital allocation rating in view of management’s well-balanced approach that maintains a strong balance sheet through prudent risk management, while simultaneously making appropriate investments in future growth and also delivering high distributions to shareholders including to its 62% parent, HSBC. Hang Seng Bank’s narrow economic moat comes from its funding advantage in Hong Kong, where it is able to attract sticky low-cost deposits that help it generate net interest margins above the market average.