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1、Deutsche Bank Markets Research Asia Hong Kong Banking / Finance Banks Industry Hong Kong Banks Date 20 February 2018 Results 2H17 preview: NIM trend, dividend guidance remain keys Reporting from mid-Feb through late March _ Deutsche Bank AG/Hong Kong Deutsche Bank does and seeks to do business with
2、companies covered in its research reports. Thus, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. DISCLOSURES AND ANALYST CERTIF
3、ICATIONS ARE LOCATED IN APPENDIX 1. MCI (P) 083/04/2017. Franco Lam Research Analyst (+852 ) 2203 6226 franco.lam Top picks DSBG (2356.HK),HKD17.26 Buy Dah Sing Financial (0440.HK),HKD50.00 Buy Source: Deutsche Bank Companies Featured BOC Hong Kong Holdings (2388.HK),HKD39.40 Sell 2016A 2017E 2018E
4、P/E (x) 4.7 12.4 13.0 Div yield (%) 7.7 3.9 3.7 Price/book (x) 1.3 1.7 1.6 Hang Seng Bank (0011.HK),HKD192.30 Sell 2016A 2017E 2018E P/E (x) 16.1 18.7 18.0 Div yield (%) 4.5 3.6 3.8 Price/book (x) 2.1 2.6 2.5 Bank of East Asia Ltd (0023.HK),HKD32.85 Sell 2016A 2017E 2018E P/E (x) 24.3 10.0 16.7 Div
5、yield (%) 1.9 3.4 2.5 Price/book (x) 1.0 1.0 1.0 DSBG (2356.HK),HKD17.26 Buy 2016A 2017E 2018E P/E (x) 9.0 10.3 9.9 Div yield (%) 2.7 2.5 2.8 Price/book (x) 0.9 1.0 0.9 Dah Sing Financial (0440.HK),HKD50.00 Buy 2016A 2017E 2018E P/E (x) 8.7 2.9 8.7 Div yield (%) 2.7 16.3 3.1 Price/book (x) 0.8 0.8 0
6、.8 Source: Deutsche Bank Our TPs are GGM/SOTP-based. Downside risks for sector: 1) severe property price correction; 2) significant asset quality deterioration. Upside risks: 1) significant earnings improvement on rate hikes; 2) payout of another huge special dividend by large banks. The HK banks wi
7、ll report their 2H/2017 results from mid-Feb to late-March, starting with HSB on Feb 20 and ending with BoCHK at the end of March. Since 1H17, we have held a cautious view on large HK domestic banks as the sector lacks new catalysts, with NIM expansion and robust loan growth largely in the price alr
8、eady. During this period, the sector has underperformed the MSCI (HK)/HSI by 1/12%. As valuations remain unattractive, we maintain our Sell ratings on BoCHK, HSB and BEA. The SG banks look more attractive, supported by cheaper valuations and more re-rating catalysts. Please refer to our outlook repo
9、rt for details. Earnings likely to be strong in 2H17, creating pressure for a higher payout We expect 2H17 earnings for the sector to look strong, up 8% HoH and 30% YoY, helped by the narrowing of the HIBOR vs. LIBOR gap as 1M/3M HIBOR rose by 73/53bp HoH; NIM should continue to trend up, as expecte
10、d. Within NoII, fee income should remain elevated on robust market activity and equity market gains for life operations. Operating expenses could seasonally pick up, while we see no asset quality issues, given higher property prices and continued low unemployment rates. With the SG banks recently pa
11、ying a higher DPS on the back of their excess capital , there are higher investor expectations that HK banks could potentially pay higher. In our view, the higher payout will be gradual as opposed to one-off, and not of the same magnitude to SG banks (SG banks previously had a much lower payout rati
12、o). Relative to SG banks, we believe HK Banks may need to preserve more capital due to lower risk weight density, as well as more capital for growth (especially BOCHK for their OBOR strategy). but we highlight some key concerns in medium term While higher HIBORs are generally positive for the listed
13、 HK banks, we have highlighted previously that the upward shift in earnings on higher rates is not linear in the long run but is affected by many moving parts, including (1)(1) new loan competition, which may dilute NIMs for the back-book (e.g. more China SOE-backed borrowing, fixed rate mortgage pl
14、ans, longer duration tax loans); (2)(2) higher funding costs through tighter LDRs and rotation from CASA to time deposits; (3)(3) any stalling of non-interest income growth, as higher deposit rates may attract some risk-adverse customers back to time deposits; (4)(4) asset quality risks, as HK banks
15、 already carry low provision buffers and can be more vulnerable to segments such as SMEs/unsecured lending when the cycle turns negatively, and (5)(5) their risk density is expected to increase accordingly. Valuations less demanding The domestic HK banks performed in line with MSCI (HK) while underp
16、erforming HSI by 5% so far this year in 2018. While the sectors valuations of 1.9x P/B, 15x P/E and 12.5% RoE look less demanding, given their underperformance vs. the SG peers, we maintain our cautious stance on HK banks. We continue to prefer the SG banks over the HK banks, supported by (1) the removal of O with better market activity in 2H17, we expect an improved 20 February 20
