According to the report released by Futu, due to recent changes in interest rate expectations, the forecast model for Hong Kong banks has been updated, lowering the average interest rate forecast for the 2025 fiscal year by approximately 150 basis points, which means the interest rate for the third quarter of 2025 is projected to be 3.25% by the Federal Reserve. Currently, the market has relatively conservative expectations for BOC Hong Kong (02388.HK), limiting further downward potential for the stock; due to its high sensitivity and weak asset growth, Hang Seng Bank (00011.HK) may have weaker performance.

Futu believes that the market consensus on BOC Hong Kong is already sufficiently conservative. The net interest margin for the second quarter showed resilience compared to market expectations, coupled with strict control and ongoing regional distribution, providing potential for outperformance in areas such as cost and loan growth.

The report indicates that Hang Seng Bank's net interest income for the first half of the year has already decreased by 9% compared to the previous year. If the net interest margin further slows down, the year-on-year decline in net interest income for the second half of the year may expand. The bank believes that the pressure on net interest margin next year will only intensify, therefore the bank's earnings per share and dividend per share forecasts for Hang Seng in the 2025 fiscal year are 7% to 8% lower than market expectations.

Furthermore, Futu still believes that Hang Seng's non-performing loans (NPLs) have not yet peaked, and due to high vacancy rates and falling rents, even with a 150 basis point interest rate cut, the interest coverage ratio for commercial real estate in Hong Kong remains tight. The bank has lowered its target price for Hang Seng from HKD 80 to HKD 79, with a rating of 'underperform'; it has also lowered the target price for Bank of East Asia (00023.HK) from HKD 10 to HKD 9.5, with a rating of 'hold'.