BOCHK’s 1H Results In Line; Fee Income Continues To Drive Near-Term Growth

Narrow-moat Bank of China Hong Kong’s, or BOCHK's, first-half results were largely in line with our expectations and we maintain our fair value estimate of HKD 36. While the bank remains undervalued, it may take time for the share price to converge toward our fair value until there is clear economic recovery in the region. The underlying fundamentals remain strong and we continue to see the bank benefiting from Southeast Asia growth and the Greater Bay Area. The bank noted account opening for cross border services saw double-digit growth while corporate cross border demand is in remittance and loans. BOCHK remains our preferred pick over Hang Seng Bank. With the operating environment broadly stabilizing, BOCHK announced interim dividend of HKD 0.447 per share, flat from last year. Our full year dividend forecast of HKD 1.26 per share is unchanged, implying a dividend payout ratio of 50% and a dividend yield of 5.3%.