BOC Hong Kong's 3Q24 performance slightly exceeded the bank's expectations, mainly due to the good performance of net interest margin and net trading income.
According to the Intelligence Finance APP, CICC released a research report stating that it maintains a 'outperform industry' rating for BOC Hong Kong (02388), with an unchanged target price of 29.53 Hong Kong dollars. BOC Hong Kong announced its 3Q24 performance brief: revenue of 18.479 billion Hong Kong dollars (+4.2% compared to the bank's expectations), +3.9% year-on-year; operating profit of 12.987 billion Hong Kong dollars (+5.7% compared to the bank's expectations), +7.8% year-on-year. The performance slightly exceeded the bank's expectations, mainly due to the good performance of net interest margin and net trading income.
CICC's main points are as follows:
Optimization of asset-liability structure drives stabilization of net interest margin.
The company's adjusted net interest income in 3Q24 increased by 1.8% month-on-month, with a quarterly net interest margin rising by 1 basis point to 1.63%. This was mainly due to the company's optimization of the asset-liability structure, dynamic management of bond investments on the asset side, increase in bond investment yields, strengthened deposit pricing and term management on the liability side. At the end of 3Q24, CASA deposits accounted for 48.4%, up 2.66 percentage points from the previous quarter.
Loan demand remains weak.
As of the end of 3Q24, the company's total loans, customer loans, and customer deposits increased by +5.6%, -1.6%, and +8.1% respectively year-on-year. Quarterly, they increased by +4.0%, -1.8%, and +2.6%. Deposits continued to grow well, but loan demand remains weak.
Fee income is moderately recovering.
In the third quarter of 2024, fee income increased by 4.6% year-on-year, and the year-on-year growth rate has been increasing each quarter since 2024. Specifically, the company stated that the improvement in fee income from insurance and fund distribution, currency trading, trust and custody services, and payment services was significant; however, due to weak crediting demand, loan commissions decreased year-on-year.
Net trading income is the highlight of this quarter.
In 3Q24, other non-interest income was 1.28 billion Hong Kong dollars, a year-on-year increase of 29.9%, mainly from the good performance of net trading income related to forex. At the same time, the boc hong kong bonds disposal operation usually occurs in the second and fourth quarters. The bank believes that the bond disposal-related losses in this quarter have little impact on the company's other non-interest income.
Credit costs are relatively stable on a quarter-on-quarter basis, with a slight increase in non-performing loan ratio.
The company made a provision of 1.242 billion Hong Kong dollars in the third quarter of 2024, mainly due to the weakening macroeconomic outlook resulting in increased provisions in the first and second stages; the annualized credit cost for the third quarter of 2024 was 0.29%, an increase of 2 basis points quarter-on-quarter; the non-performing loan ratio at the end of the third quarter of 2024 was 1.11%, an increase of 5 basis points quarter-on-quarter.
Risks: Unexpectedly large decrease in interest rates, worsening of risks related to real estate exposure.
