BOC Hong Kong’s Weaker Fiscal 2021 Results Within Expectation

While the headline numbers in BOC Hong Kong’s fiscal 2021 results were below our forecasts, the underlying operational trends were largely within our expectations. Earnings per share of HKD 2.17 was below our forecast of HKD 2.45, but this was mainly due to more volatile items in mark to market of financial instruments and net insurance loss. From its peers’ earlier reported results, the key concern for BOC Hong Kong was the magnitude of net interest margin, or NIM, decline and a deterioration in asset quality and higher credit cost. NIM compressed amid the low interest rate environment but we expect it to gradually increase on a higher U.S. interest rate. Positively, asset quality was stable with the nonperforming loan ratio steady at 0.27%, and credit cost has declined to 0.12% from 0.16% a year ago.