Jefferies Research lifted its target price for Hang Seng Bank (HSB) (00011) to HK$167.8 from HK$120.8 on higher long-term earnings growth and maintained its "hold" rating.
The research house said HSB's 2H 2020 results were mixed. On the bright side, the retail recovery was in progress, along with lower credit costs and dividend normalization. However, challenges still remain as top-line weakness likely will continue in 2021 due to suppressed NIM, bottom line dragged by the high cost to income ratio, and asset quality pressure remain an overhang.
Given the near-term challenges of a high cost to income ratio, Jefferies cut its 2021/20 earnings forecasts. On the other hand, it raised its long-term earnings growth estimates to 8-10% on the back of a strong retail business franchise, better economic prospects and wealth management connect program.
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