[ET Net News Agency, 26 February 2018] HSBC Global Research raised its target price for
Bank of East Asia (BEA) (00023) to HK$29.5 from HK$27.1 and maintained its "reduce"
rating.
The research house noted BEA's 2017 core earnings up 89% y-o-y on lower impairment
charges, and asset quality finally shows signs of improvement.
However, HSBC believes outlook on margin remains unclear with loan growth yet a
priority. While the management seem optimistic on net interest margin (NIM) outlook in
Hong Kong, HSBC is more cautious since HIBOR has resumed its downward trend year to date
and loan pricing is still competitive in mortgages and large corporate lending, while
challenges remain in China. Moreover, the management are guiding for only mid-single digit
loan growth in 2018e as they are still in the process of improving asset quality, though
it is positive to see more room for cost savings and clearer long-term strategic pivot to
retail business in China.
HSBC raises its 2018/19 earnings estimates by 8/7% mainly from 4% higher net interest
income on slightly higher NIM forecast and better return on free funds despite slower loan
growth forecast and lower cost-income assumption due to faster-than-expected progress in
cost savings. (HL)