BOC Hong Kong (2388) H1 2017 earnings summary

Executive summary

• Continuing-operations profit attributable to equity holders rose 24.5% YoY to HKD 14,627m, a record since listing; total attributable profit was HKD 17,216m.

• Growth was broad-based, with Personal Banking, Corporate Banking and Treasury PBT up 12.7%, 14.2% and 19.9% YoY, respectively.

• H1 strategy emphasized Hong Kong growth, ASEAN expansion, digital transformation and diversified income; full-year targets include double-digit loan and deposit growth.

Financial highlights

• Operating profit before impairment allowances increased 17.1% YoY; net operating income rose 13.7% against 5.2% growth in operating expenses.

• Net interest income increased 41% YoY; net fee and commission income was HKD 5,662m, up 0.8% YoY and 14.2% vs H2 2016.

• Investment and insurance product-related net fee income rose 12.6% YoY; securities brokerage and fund distribution fees rose 23.6% and 22.6%.

• Total assets reached HKD 2.64tn and liabilities HKD 2.4tn, up 13% and 14% from 2016 year-end; customer loans reached HKD 1.1tn, up 12.9%.

• Customer deposits reached HKD 1.65tn, up 9.3% from year-end; market share rose 0.5 percentage points to 13.62%.

Outlook and guidance

• FY customer loans and deposits targeted to grow at double-digit rates and above market averages; H2 loan growth expected to moderate from H1 but exceed 10% for the year.

• H2 strategy prioritizes prudent growth, Hong Kong lending and deposits, regional expansion, stronger risk management and improved income mix.

• Stable NIM targeted in H2; FY 2017 NIM expected to exceed 2016, despite loan-pricing competition and pressure from rising fixed-deposit costs.

• ASEAN institutions targeted to grow loans and deposits by more than 20%; full-year continuing-operations attributable profit targeted to reach a new high.

• Investment and insurance product revenue expected to grow well in H2; card fee income expected to return to positive growth in the near term.