[ET Net News Agency, 18 February 2021] Hang Seng Bank (HSB) (00011) is scheduled to
release its FY2020 result on 23 February. Morgan Stanley said the impact of lower rates on
Hang Seng's NIM (net interest margin) has exceeded expectations throughout the year.
1H NIM was 196bps, with a 1Q NIM of 213bps and 2Q of 180bps. The research house lowered
its 2020 EPS estimates by 14% post 1H results, largely a result of lower income (Morgan
lowered NIM by 6bps and non-interest income forecasts by 12%).
It expects that NIM will have fallen in 2H to 151bps. Morgan expects that NIM will
settle around this level in 2021, and hold there until 2023 when the impact of rising US
short rates in 3Q 2023 should benefit HK loan yields.
Unlike HSBC (00005), or Standard Chartered (02888), the local banks experienced only a
modest pick up in loan loss charges in 2020. Morgan expects credit charges will recover in
2021. Hang Seng bank's ECL (expected credit losses) was 37bps of loans in 1H 2020. Morgan
expects it will fall to 28bps in 2H 2020 and 20bps in 2021.
Morgan forecasted a 4Q dividend of HK$2.70, driving a full-year dividend of HK$5.5,
which is equivalent to a 70% payout.
Morgan maintained its "underweight" call on HSB, with a HK$123 target price unchanged.
(KL)