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<Research>UBS Maintains Cautious Outlook on HK Banks, Lifts TPs for BOC HONG KONG/ BANK OF E ASIA
Recommend 19 Positive 26 Negative 23 |
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Despite the Fed's rate-cutting cycle, the one-month HIBOR still rebounded, narrowing its gap with the US Secured Overnight Financing Rate (SOFR), UBS released a research report saying. The average one-month HIBOR for 4Q25-to-date was 3.19%, 113 bps higher than that in 3Q25, providing strong support for banks' net interest income. It is currently expected that Hong Kong banks' net interest income in 4Q25 will surpass the 3Q25 levels, and market forecasts are likely to be lifted. However, UBS cautioned that, while Hong Kong banks have seen improved net interest income performance, non-performing loan risks have risen in tandem during 2H25. Market concerns over China's commercial real estate risks renewed, as CHINA VANKE (02202.HK) requested debt extensions and China's second-hand home prices accelerated their decline since October, both dampening market sentiment. Consequently, the broker raised its 2H25 credit cost forecasts for BOC HONG KONG (02388.HK) and BANK OF E ASIA (00023.HK). Looking ahead to 2026, UBS maintained a cautious outlook on Hong Kong banks, and anticipated that market focus will shift to the sector's 2026 earnings prospects, with net interest income and credit costs emerging as key drivers. Therefore, UBS reiterated ratings at Neutral for BOC HONG KONG and BANK OF E ASIA, and lifted its target prices from $37/ $12.5 to $40/ $13.5 respectively, reflecting the reduction in equity costs following the rate cuts. AASTOCKS Financial News Website: www.aastocks.com |
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