Bank of China (Hong Kong) Ltd.

BOCHK's controlled risk appetite, manageable at-risk exposure, and adequate collateral and provision coverage will continue to support its asset quality. The bank reduced its CRE exposures in Hong Kong and mainland China to 15% and 5.3% of total loans at end-June 2024, from 17% and 5.4% at end-2023, respectively. BOCHK's net interest margin (NIM) will decline by about 15 bps over 2024-2026 due to cuts in interest rates in Hong Kong, mirroring the trend of the U.S Fed Funds rate. Meanwhile, credit costs could inch back down as the interest rate burden falls and debt serviceability improves. The stable outlook on BOCHK reflects our expectation that the bank will maintain its high systemic importance in Hong Kong, and its business

...Bank of China (Hong Kong) Ltd. (BOCHK) can manage strains from the CRE sector. The bank has a track record of low nonperforming loans (NPLs) through cycles. We forecast its NPL ratio will rise to 1.45% at end-2024 before gradually declining to 1.05% at end-2026--about 80 basis points (bps) below our sector forecast--as declining interest rates lower the debt service burden on customers. BOCHK's NPL ratio increased slightly to 1.06% at end-June 2024, from 1.04% at end-2023, but remained lower than the industry average of 1.89%. BOCHK's controlled risk appetite, manageable at-risk exposure, and adequate collateral and provision coverage will continue to support its asset quality. The bank reduced its CRE exposures in Hong Kong and mainland China to 15% and 5.3% of total loans at end-June 2024, from 17% and 5.4% at end-2023, respectively....

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