We initiate with a "Buy" rating and a TP of HK$33.50. BOC Hong Kong ("BOCHK", or the "Company") demonstrates sustainable profitability fundamentals with strong business expansion visibility. Retail and corporate banking provide stable core operations, while insurance and treasury businesses enhance earnings scale. The Company continues to expand its presence in GBA and SEA markets. We project 2024-2026F net operating income growth of 6.5%/ 1.0%/ 6.1% and net profit growth of 11.5%/ 5.2%/ 10.8%. Our target price of HK$33.50 is based on PB valuation, implying 2024-2026F PB multiples of 1.05x/ 0.99x/ 0.94x. Given its stable growth outlook, BOCHK commands a premium valuation versus Hong Kong peers' average 2024F PB.

BOCHK is one of Hong Kong's three note-issuing banks and the sole RMB clearing bank, maintains a strong position amid RMB internationalization. The Company has established a trilateral growth strategy centered on Hong Kong, with synergistic development across the GBA and SEA. BOCHK stands to benefit from three major strategic opportunities: RMB internationalization, GBA integration, and Chinese enterprises' overseas expansion. It is well-positioned to capture growth in RMB FX service and treasury management as Hong Kong strengthens its offshore RMB hub status. Additionally, GBA integration will drive increased cross-border commercial activities, while BOCHK's SEA presence provides solid support for Chinese enterprises' overseas expansion, creating new growth opportunities and high-quality client relationships.

BOCHK consistently maintains industry-leading ROE among Hong Kong peers. We expect sustained earnings growth driven by: 1) US Fed's slower rate cut pace will moderate NIM pressure; the Company's high-quality assets and sophisticated liability cost management should maintain stable NIM levels; 2) property market is likely bottoming out; given superior loan customer quality of the Company, NPL ratio remains below industry average. As mainland property sector stabilizes, real estate exposure risks will further clear, reducing impairment losses to low levels; and 3) active expansion in GBA and SEA attracts diverse regional clients, supporting loan and deposit growth. Additionally, accelerating GBA integration and expanding cross border wealth management connect scheme should steadily boost fee income from payment services, credit facilities, and wealth management service etc. Insurance business also shows steady progress under regional integration, collectively driving non-interest income growth.

Catalysts: 1) US Fed may slow rate cut; 2) cross-boundary wealth management connect; and 3) proactive policy may boost property market

Risks: 1) Real estate industry depressed, with asset quality deteriorating; 2) weak credit demand in Hong Kong; and 3) economic downturn may exceed expectations