UBS Group released a report stating that BOC Hong Kong (02388.HK) is scheduled to announce its third-quarter performance at the end of this month. They believe that despite various income pressures, the operation trend of BOC is expected to remain stable. Anticipating a decrease in impairment expenses under the benign trend of asset quality, and with strong non-interest income, UBS Group expects a 0.3% increase in BOC's net profit in the third quarter. Hong Kong Interbank Offered Rate (HIBOR) for one month in the third quarter decreased by 19 basis points to 4.2% quarterly. UBS Group predicts a slight narrowing of BOC Hong Kong's adjusted net interest margin by 4 basis points to 1.58% in the third quarter, mainly due to weak loan demand and declining deposit rates, actively increasing exposure to bond investments. However, the bank anticipates downside risks to BOC's net interest margin in the fourth quarter. Overall, the bank expects a slight 0.6% year-on-year decrease in BOC's net interest income in the third quarter.

The report suggests that BOC Hong Kong's third-quarter fee income is modest, but there is room for growth in the fourth quarter. UBS Group anticipates a strong recovery in capital markets-related fee income for BOC Hong Kong in the fourth quarter, supported by the rising stock market. The bank expects a slight year-on-year increase in BOC Hong Kong's full-year net fee income. Additionally, even if the non-performing loan rate and credit costs increase slightly, UBS Group believes that BOC's asset quality remained largely stable last quarter. Measures in the Policy Address to support loans for small and medium-sized enterprises are expected to help banks reduce the risk of non-performing loans in the short term.

UBS Group raised its revenue forecast for BOC Hong Kong and increased this year's profit estimate by 2.7%. Calculated by cash flow discount rate, the target price has been raised from the original 24 yuan to 26.5 yuan, with a 'Neutral' rating.