DBS Group Research re-initiated coverage on Hang Seng Bank (HSB)(00011) with a "hold" rating and a target price of HK$172.
HSB is expected to be hit the most in the interest rate downcycle environment, largely due to its large HKD and USD assets on its balance sheet. The research house said, for every 50-bp/25-bp decrease in LIBOR/HIBOR would cause HSB's NIM to drop by 10bps, versus
BOCHK's (02388) 7bps, DSBG's (02356) 4bps and BEA's (00023) 3bps.
DBS expects HSB's FY2020 NIM to decline by 6bps to 2.13% as tight liquidity in HK may
help to ease the downside. Given the challenging macro environment and weak domestic economy, it expects HSB's loan growth to slow to 4-5% in FY2020-21 and deposit growth to track relatively closely with loan growth given competition for deposits and capital outflow.
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