The resilience of the net interest margin and the reduction of credit costs have improved the profit outlook of BOC Hong Kong and received an positive rating rating (J.P. Morgan)

Street Signal | The resilience of the net interest margin and the reduction of credit costs have improved the profit outlook of BOC Hong Kong and received an positive rating rating (J.P. Morgan)

J.P. The upward revision stems from three points: the resilience of net interest margin supports interest income growth, Hong Kong commercial real estate risk mitigation reduces credit costs, and the shareholder return plan is expected to bring additional income catalysts.

The current stock price implies a total shareholder return (TSR) of nearly 8%, and the valuation is reasonable. The stock is expected to continue its outperformance relative to the market. One-sentence conclusion: BOCHK's profit prospects have improved significantly due to the improvement in net interest margin resilience and credit costs.

Coupled with high shareholder returns, it is a high-quality choice in the current Hong Kong banking sector. Positive/negative: Positive for Bank of China (Hong Kong) (2388.HK). The market may have underestimated the extent of its net interest margin resilience and credit cost improvement, and there is room for revaluation of the stock price. Catalysts:

1) Net interest margin trend of Hong Kong banking industry;

2) Recovery of Hong Kong commercial real estate market;

3) Company dividend and repurchase plans.