Phillip Securities Group
Please note that the Day Light Saving of Europe and US will be effective on April 1st and March 11th respectively. The trading hours for those relevant contracts will be 1 hour earlier. Any questions, please contact us at 22776677.For details, please visit our foreign futures website or contact us at 22776677.Moreover,the spread of USD/JPY is low as one pip.Please click here for details
Research Report: Stock code:
  03-04-2013 (嚙確)    Bank of China Hong Kong (2388.HK) - Lack of growth highlights
  19-04-2012 (嚙罵)    BOC HK (2388.HK) - First choice in HK banking sector
  30-11-2011 (嚙確)    Bank Of China HK (2388.HK) - Good Q3 result as usual
  19-07-2011 (嚙瘦)    Bank Of China HK (2388.HK) - Unique RMB business concept in industry
  28-10-2010 (嚙罵)    Bank of China Hong Kong (2388.HK) 癒X癒X RMB clearing house which can invest in the China bonds
[第1頁 / 共3頁]
Bank of China Hong Kong(2388)
  Share this article:    
Recommendation on   03-04-13 
Recommendation Neutral
Price on Recommendation Date $ 25.950
Suggested purchase price N/A
Target Price $ 27.050
Weekly Special - 601021.CH SPRING Airlines
Written by: Benny Lee( Research Analyst )
+852 2277 6751


Bank of China Hong Kong (2388.HK) - Lack of growth highlights

FY 2012 Summary

Growth in core business

BOC HK's FY 12 performance was in line with our expectation:

Net interest income achieved to HK $ 24.708 billion (HKD as below), up 12.4 % yoy or 27.29 billion HKD, NIM improved to 1.6%

Net fees and commissions, rose 0.9 % yoy to 7.906 billion HKD,

Net trading income increased by 83% yoy to 3.129 billion HKD, mainly due to net trading income of the foreign exchange trading and related products, driven by an increase of 558 million HKD, or 39% yoy. The interest rate instruments and items under fair hedge rose by 74 times yoy to 900 millions. Accounted for the vast growth of the trading business.

Profit before tax reached 25.521 billion, an increase of 3.41% yoy.

Due to the Lehman Brothers mini-bonds related expense, total operating expenses increased by 45% yoy to 11.402 billion, core operating expenses rose 7.9%, or 839 million.

In FY 12 basic earnings per share was HK $ 1.9796, up 2.46 % yoy, dividend increased 4.2% yoy to $ 1.238, to maintain a 62.5% payout ratio as past. However, the FY 12 result of BOCHK was not impressive, thus, we downgrade the investment rating to "Neutral" and rise target price to HK$27.05.

Based on the development of RMB business and the Group's long-term advantages, coupled with stable dividend payout policy, investors can buy for long-term holding at lower price

Net Interest Income

Due to the dilutive effect of RMB business reduced, NIM rallied by 28bp in 2013

However the deposit market is increasingly competitive, the Group's loan to deposit ratio increased to 63.32%. Net interest income is still up to $ 24.708 billion, up 12.4 % yoy or 2.729 billion.癒CWe expect a strong demand in offshore RMB lending, which let a keen competition in attracting deposit, negative effect to NIM.

Fee and commission income

Group's net fee and commission income also recorded a slight growth, up 0.9 % yoy to 7.906 billion, the growth momentum mainly driven by credit cards, insurance business, up 14.5% yoy. Securities brokerage income fell 24% yoy, due to the volatility market conditions in 2012. We expected the debt crisis in Europe will be released, market sentiments improved, and the market turnover rose, securities brokerage income is expected to rebound in 2013.

Major Risk

European sovereign debt crisis continues to worsen, affect global economy

Group's growth rate is slower than we expected

Chinese economic hard landing


BOC Hong Kong's nine-year average P/B is about 2 times, while the current price P/B is about 1.8 times. With Europe's debt crisis slightly eased, and the opportunities of Rmb internationalization, the Group's P/B is expected to back to 2 times which is near our target price $27.05.

Dividend Policy

DDM Model

Due to the trend of Rmb internationalization o, we expect that the Group will grow steadily, dividend per share will be HKD $ 1.29 in 2013. Assume the growth rate will be 4%, we use dividend discount model calculated the fair value per share is HK $ 27.05. The corresponding estimated P/B is about 1.73 times and P/E is 13.19 times.

Peers Comparison

Financial Status

Click Here for PDF format...

Back to Top

Information contained herein is based on data obtained from recognized statistical services, issuer reports or communications, or other sources believed to be reliable. However, we do not verify such information. We do not guarantee its accuracy or completeness, nor do we take responsibility for any loss occasioned by reliance placed upon the contents hereof. Any statements nonfactual in nature constitute only current opinions, which are subject to change. Phillip Securities (HK) Ltd (or one of its affiliates) or their officers, directors, analysts, or employees may have positions in securities or commodities referred to herein, and may, as principal or agent, buy and sell such securities or commodities. An employee, analyst, officer, or a director of Phillip Securities (HK) Ltd, or its affiliates, may serve as a director for companies mentioned in this report. Neither the information nor opinion expressed in this report shall constitute a solicitation to buy or sell any securities. There may be instances when fundamental, technical, and quantitative opinions may not be in concert. This firm (or one of its affiliates) may from time to time perform investment banking or other services for, or solicit investment banking or other business from, any company mentioned in this report.
There are risks inherent in international investments, which may make such investments unsuitable for certain clients. These include, for example, economic, political, currency exchange rate fluctuations, and limited availability of information on international securities. We recommend that you obtain the advice of your Financial Advisor regarding this or other investment in order to conform to your financial resources and risk preference

Copyright © 2011 Phillip Securities Group. All Rights Reserved [ Risk Disclosures Statement ] [ Terms and Conditions ] [ Personal Data Policy ]