Ed One Stop: Hang Seng Bank, a Hong Kong stock account opening broker "2.9 Smart Daily Gold Stocks"

Ed One Stop: Open an account to play a new brokerage [Hong Kong Stocks Smart Selection - Daily Gold Stocks] Hang Seng Bank.

Date: February 9, 2022

【Daily Gold Stocks】 is a daily pre-market share of 1-2 potential targets selected from thousands of stocks by analysts of AIDE Securities futures on the basis of digging deep into the fundamentals, interpreting the news and analyzing the technical aspects.

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Daily Gold Shares: Hang Seng Bank (00011.HK)

Key takeaways:

1) The financial results are expected to be in line with expectations, and the net interest margin has the opportunity to bottom. Hong Kong banks' outlook for 2022 financial results tends to be more optimistic, mainly due to the fact that the recovery in interest rates will help improve interest rate spreads, the gradual implementation of businesses such as "Cross-Border Wealth Management Connect" will bring new growth opportunities, and non-interest income is also expected to increase. The market expects to face multiple interest rate hikes in 2022, the lending business remains resilient, and the optimistic economic sentiment will translate into steady growth in the lending business. Assuming the Fed raises interest rates four times, the bank expects hong Kong banks' equity returns to recover to about 12% by 2024. Hang Seng Bank's (00011.HK) price-to-book ratio valuation is expected to nearly triple.

2) Hang Seng Net Interest Margin is superior to its peers. Compared with the other four local banks in Hong Kong, China (BOCHK, Dah Hsin Bank, Bank of East Asia and HSBC Hong Kong), Hang Seng Bank's net interest margin is stable in the top 2. From 2006 to 2020, Hang Seng Bank's loans to total assets increased by 11.9pct to 53.7%, 1H21 continued to increase by 2.6pct to 56.3%; demand deposits as a proportion of total liabilities averaged 67.7%, and 1H21 demand deposits continued to increase by 3.9pct to 81.8% compared with the end of 2020. 1H21 net interest margin of 1.51%, compared to 1.52% of 2H20 has basically stabilized.

3) Asset quality due to peers, dividend payout ratio is higher. Hang Seng Bank's non-performing ratio is at a low level compared with BOCHK, Dah Sing Bank Group and Bank of East Asia. In the 15 years from 2006 to 2020, only 5 years of Hang Seng Bank's non-performing loan coverage ratio exceeded 100%. Compared with the end of 2020, the 1H21 non-performing ratio increased by 9bp to 0.69%, the cost of credit fell sharply by 22bp to 0.07%, and the loan-to-loan ratio decreased by 5bp to 0.50%. In addition, Hang Seng Bank's annual dividend per share divided by the average transaction price of the year, the 6-year dividend rate ranked first among the above-mentioned banks, with an average dividend yield of 4.7% in 15 years. The 1H21 dividend rate is 48%, an increase of 8pct compared to 40% of 1H20.

"Author: Chen Gang, Co-Director, Aide Securities and Futures Research Department (a SFC licensed person whose and associated persons do not have a financial interest in the above proposed share issuer)"

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