Company Reports

We believe BOC Hong Kong's strong financial fundamentals and close connection with its parent, Bank of China, position it well to benefit from rising economic integration between Hong Kong and the Greater Bay Area on both sides of the Pearl River. It has a long history operating in Hong Kong, where it has the second-largest market share of deposits after HSBC, and is competitive in offering cross-border banking services to its retail and wholesale clients. Its funding advantage from a large base of sticky deposits is complemented by tight cost control discipline, which has resulted in an industry-leading cost/income ratio of below 30%.

BOC Hong Kong's first-half operating profit was largely flat, as weaker trading income offset higher net interest income and lower impairment charges. The bank announced additional shareholder returns of at least HKD 10.5 billion over 2026-28, including a 2026 special dividend of HKD 0.24 per share.

BOC Hong Kong released first-quarter operating performance data, with net operating income before impairment allowances down 0.7% year on year. Net profit rose 7.0%, mainly driven by lower credit costs. The first-quarter dividend per share of HKD 0.29 was flat year on year.

We believe BOC Hong Kong's strong financial fundamentals and close connection with its parent, Bank of China, position it well to benefit from rising economic integration between Hong Kong and the Greater Bay Area on both sides of the Pearl River. It has a long history operating in Hong Kong, where it has the second-largest market share of deposits after HSBC, and is competitive in offering cross-border banking services to its retail and wholesale clients. Its funding advantage from a large base of sticky deposits is complemented by tight cost control discipline, which has resulted in an industry-leading cost/income ratio of below 30%.

We believe BOC Hong Kong's strong financial fundamentals and close connection with its parent, Bank of China, position it well to benefit from rising economic integration between Hong Kong and the Greater Bay Area on both sides of the Pearl River. It has a long history operating in Hong Kong, where it has the second-largest market share of deposits after HSBC, and is competitive in offering cross-border banking services to its retail and wholesale clients. Its funding advantage from a large base of sticky deposits is complemented by tight cost control discipline, which has resulted in an industry-leading cost/income ratio of below 30%.

BOC Hong Kong's 2025 net profit grew 4.9% on the back of resilient net interest income and strong growth in net fee and commission income. The full-year dividend per share grew 6.8% to HKD 2.13.

Bank of China Hong Kong's strong financial fundamentals and close connection with its parent, Bank of China, position it well, in our view, to benefit from rising economic integration between Hong Kong and the Greater Bay Area on both sides of the Pearl River. It has a long history operating in Hong Kong, where it has the second-largest market share of deposits after HSBC, and is competitive in offering cross-border banking services to its retail and wholesale clients. Its funding advantage from a large base of sticky deposits is complemented by tight cost control discipline, which has resulted in an industry-leading cost/income ratio of below 30%.

BOC Hong Kong released third-quarter operating performance data showing operating income before impairment allowances fell 7.2% year on year, mainly due to lower net interest income, partly offset by higher net fee income. The bank declared a third-quarter dividend of HKD 0.29 per share.

Bank of China Hong Kong's strong financial fundamentals and close connection with its parent, Bank of China, position it well, in our view, to benefit from rising economic integration between Hong Kong and the Greater Bay Area on both sides of the Pearl River. It has a long history operating in Hong Kong, where it has the second-largest market share of deposits after HSBC, and is competitive in offering cross-border banking services to its retail and wholesale clients. Its funding advantage from a large base of sticky deposits is complemented by tight cost control discipline, which has resulted in an industry-leading cost/income ratio of below 30%.

Bank of China Hong Kong reported first-half 2025 annualized return on equity of 12.9%, well above our 10.5%-11.0% five-year forecast and our 9.5% cost of equity assumption.

Bank of China Hong Kong's strong financial fundamentals and close connection with its parent, Bank of China, position it well, in our view, to benefit from rising economic integration between Hong Kong and the Greater Bay Area on both sides of the Pearl River. It has a long history operating in Hong Kong, where it has the second-largest market share of deposits after HSBC, and is competitive in offering cross-border banking services to its retail and wholesale clients. Its funding advantage from a large base of sticky deposits is complemented by tight cost control discipline, which has resulted in an industry-leading cost/income ratio of around 30% or even lower.

We adjust our Morningstar Uncertainty Ratings for 14 of the 16 Asia, excluding China, stocks we cover after US President Donald Trump announced much more severe tariffs on imports than we or the market were expecting, raising uncertainty over future economic conditions across Asia.

Bank of China Hong Kong, or BOCHK, reported annualized return on equity of 10.9% for the second half of 2024 and declared a final dividend of HKD 1.419 per share, bringing its full-year payout ratio to 55.0%, up from 54.0% in 2023.

Bank of China Hong Kong's strong financial fundamentals and close connection with its parent, Bank of China, position it well, in our view, to benefit from rising economic integration between Hong Kong and the Greater Bay Area on both sides of the Pearl River. It has a long history operating in Hong Kong, where it has the second-largest market share of deposits after HSBC, and is competitive in offering cross-border banking services to its retail and wholesale clients. Its funding advantage from a large base of sticky deposits is complemented by tight cost control discipline, which has resulted in an industry-leading cost/income ratio of around 30% or even lower.

BOC Hong Kong, which reports earnings semiannually, released third-quarter key operational metrics such as assets, loans, deposits, revenue, and operating profit. Though the disclosure does not include bottom-line net profit, it gives some indication of how BOCHK fared in the quarter.

We transfer coverage of seven Hong Kong and Singapore banking groups to a new primary analyst.

Bank of China Hong Kong's strong financial fundamentals and close connection with its parent, Bank of China, position it well, in our view, to benefit from rising economic integration between Hong Kong and the Greater Bay Area on both sides of the Pearl River. It has a long history operating in Hong Kong, where it has the second-largest market share of deposits after HSBC, and is competitive in offering cross-border banking services to its retail and wholesale clients. Its funding advantage from a large base of sticky deposits is complemented by tight cost control discipline, which has resulted in an industry-leading cost/income ratio of around 30%.

We maintain our fair value estimate for Bank of China Hong Kong, or BOCHK, at HKD 33 per share, which is 1.05 times book value and nearly 40% above the current price, following the release of its interim results. In the first half of the year, BOCHK's annualized return on equity was 12.4%, the highest six-month ROE since before the pandemic. This performance exceeds our estimate of BOCHK's cost of equity but remains below the average ROE of 13.5% seen in the 2010s.

We keep our fair value estimate for BOC Hong Kong, or BOCHK, at HKD 33 following 2023 results that were largely within our and market expectations, while management's outlook does not lead to much change to our near- and midterm assumptions. Dividend payout of 53% was a nice surprise, but we still expect payout to ease to around our midcycle assumption of 50%. We think BOCHK is keen to keep dividends on a growth trajectory, and this should support some investor interest. The bank's capital position—with its common equity Tier 1 ratio at 19% in 2023, which we expect to be maintained at around 16% over our five-year projected period—allows BOCHK to continue to grow its dividends. We see BOCHK as one of our preferred banks. Our fair value estimate corresponds to a 2024 price/earnings of 10.6 times, and we think price/book of 1 time is backed by return on equity of 10%-11%.

Bank of China Hong Kong's strong financial fundamentals and close connection with its parent, Bank of China, position it well, in our view, to benefit from rising economic integration between Hong Kong and the Greater Bay Area on both sides of the Pearl River. It has a long history operating in Hong Kong, where it has the second-largest market share of deposits after HSBC, and is competitive in offering cross-border banking services to its retail and wholesale clients. Its funding advantage from a large base of sticky deposits is complemented by tight cost control discipline, which has resulted in an industry-leading cost/income ratio of around 30%.