Hang Seng Hong Kong commercial property loan collateral is healthy, and it is expected that there will not be too much additional expected credit loss (ECL) costs.
Zhitong Finance and Economics app learned that DBS released a research report stating that it maintains a "hold" rating on Hang Seng Bank (00011) with a target price lowered from HKD 97 to HKD 90. The profit assumption from 2024 to 2026 is roughly unchanged, because the collateral condition of Hang Seng's Hong Kong commercial property loan is stable, and it is expected that there will not be too much additional expected credit loss (ECL) fees. However, the assumption of its cost of equity is increased to reflect the market's concern about the impact of Hong Kong commercial property asset quality.
The report pointed out that Hang Seng Bank's performance in the first half of the year was roughly in line with expectations, focusing on asset quality and capital adequacy. The report stated that Hang Seng's non-performing loan ratio rose to 5.32%, compared with 2.83% at the end of last year; CET-1 ratio fell from about 18.1% at the end of the 2023 fiscal year to 16.6%, partly due to conservative recognition of regulatory reserves after the deterioration of Hong Kong commercial property asset quality, and increased doubts in the market about whether Hang Seng's capital position can support further share repurchases.