In a report released yesterday, Sam Wong from Jefferies maintained a Hold rating on Hang Seng Bank (HSNGF – Research Report), with a price target of HK$92.00.
Sam Wong has given his Hold rating due to a combination of factors reflecting Hang Seng Bank’s mixed financial outcomes and market position. The bank’s second-half results for 2023 showed a strong net interest margin (NIM), which increased significantly and contributed to a better-than-expected net interest income. However, this was counterbalanced by a decline in loan growth. Hang Seng Bank also demonstrated cost discipline, improving its cost-to-income ratio, and declared a final dividend per share that exceeded expectations. Additionally, the bank’s capital position strengthened, with a notable rise in its Common Equity Tier 1 (CET1) ratio, due to a reduction in risk-weighted assets.
Despite these positives, Sam Wong’s assessment was tempered by some concerns. Non-interest income underperformed, particularly in brokerage, insurance, and credit facilities. Trading income also saw a decrease. Asset quality remains an area of focus, with provisions for loan losses surging, although the non-performing loan (NPL) ratio remained relatively stable. These mixed signals suggest potential uncertainties in the bank’s future performance, particularly in the context of asset quality and the broader economic environment, leading to the Hold recommendation.
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Hang Seng Bank (HSNGF) Company Description:
Hang Seng Bank Ltd. provides commercial banking and related financial services. It operates through the following business segments: Retail Banking and Wealth Management, Commercial Banking, Global Banking and Markets, and Other. The Retail Banking and Wealth Management segment offers a range of products and services to meet the personal banking, consumer lending, and wealth management needs of individual customers. The Commercial Banking segment provides products and services to corporate, commercial, and small-to-medium sized enterprises customers. The Global Banking and Markets segment gives tailored financial solutions to major corporate and institutional clients. The Other segment represents the holdings of premises, investment properties, equity shares and subordinated debt funding as well as central support, and functional costs with associated recoveries. The company was founded by Sin Hang Ho in 1933 and is headquartered in Hong Kong.
