The Zhitong Finance App learned that UBS released a research report stating that it maintained the Bank of China Hong Kong (02388) “neutral” rating. Despite the strengthening of the Hong Kong Interbank Interest Rate (HIBOR) in the fourth quarter, the company indicated that its net interest spread narrowed slightly in the fourth quarter due to large inflows of temporary capital, but net interest income is still likely to grow on a quarterly basis, with a target price of HK$20.

According to the report, BOCHK's net interest spread is expected to be under pressure in 2024 because of seasonal effects, HIBOR's fall in the first month of this year, and factors such as the Federal Reserve's interest rate cuts, and credit costs are expected to rise sharply in the fourth quarter due to the downturn in the real estate market. Because BOC Hong Kong increased its provision for commercial real estate risk exposure in China, impairment expenses are expected to rise to HK$13.1 billion in the fourth quarter.

The bank expects BOCHK to maintain a 53% dividend payout ratio in 2023, and believes that BOCHK can pursue a progressive dividend payment policy. Therefore, considering that any interest rate cut by the Federal Reserve will put pressure on banks' net profit, thereby affecting future net profit, UBS is less likely to increase its dividend payout rate in 2023. Once the Federal Reserve cuts interest rates and BOCHK's net profit falls, BOCHK may adjust the dividend rate. Based on the closing price last Friday, it is expected to have a dividend rate of 8.3%, reducing net profit attributable to common shareholders in fiscal year 2023 to HK$31.7 billion.