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BOC Hong Kong Holdings Ltd 02388

Rating as of

Morningstar’s Analysis

Valuation
Currency in HKD
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Is it the right time to buy or sell?
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1-Star Price

PREMIUM

5-Star Price

PREMIUM

Economic Moat

PREMIUM

Capital Allocation

PREMIUM

BOC Hong Kong Undervalued on Better Outlook for NIM in Medium Term

Michael Wu, CAIA Senior Equity Analyst

Analyst Note

| Michael Wu, CAIA |

Ahead of the first-half results, we raise our fair value estimate for narrow-moat-rated BOC Hong Kong to HKD 36 per share from HKD 34. While there is no change in our view that net interest margin will decline on a full-year basis in 2021, we lift our medium-term net interest margin assumption to factor in market expectations of rising interest rates at the end of 2022. This should start flowing through to net interest margin in 2023. The magnitude of the increase is dependent on the level of system liquidity, competition on deposits, and also pricing on the asset side. Our 2021 dividend forecast of HKD 1.26 per share is reaffirmed, which represents a dividend yield of 4.9% at the current share price of HKD 25.75. Our dividend forecast assumes a payout ratio of 50%, at the midpoint of the bank’s guidance of 40%-60%. With a strong capital position and more certainty on the current COVID-19 situation, there may be some upside in the bank opting for a higher dividend payout as earnings are expected to be flat in 2021.

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Company Profile

Business Description

Bank of China Hong Kong is a subsidiary of Bank of China. It is the second largest bank in Hong Kong in terms of loan and deposit market shares. BOCHK is legally separate from Bank of China but maintains close relationships in management, administration, and business relations. They also co-operate in several areas including products, such as the reselling of Bank of China's insurance and securities services. Bank of China holds a 66% stake in Bank of China Hong Kong.

Contact
1 Garden Road, 53rd Floor, Bank of China Tower
Hong Kong, Hong Kong
T +852 28266314
Sector Financial Services
Industry Banks - Regional
Most Recent Earnings
Fiscal Year End Dec 31, 2021
Stock Type
Employees 14,915

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