【2388 Performance】Bank of China Hong Kong expects the non-performing loan ratio to remain under upward pressure. Last year, profit increased by 5%, with a final dividend of HKD 1.255. The current dividend yield is 5.2%.

Bank of China (Hong Kong) (02388) Announces its interim results. Profit attributable to shareholders increased by 4.9% year over year to HK$40.121 billion. The company will pay a final dividend of HK$1.255 per share. Together with the three prior interim dividends, the total interim dividend for the first half of the year was HK$2.125, up 6.8% versus the same period last year. The payout ratio was 56%, up by 1 percentage point year over year.

Bank of China (Hong Kong) fell 1% on Monday, closing at HK$40.54. Based on this, the current dividend yield is 5.24厘.

Net interest margin down 6 basis points year over year

In the period, net operating income before impairment provisions for Bank of China (Hong Kong)’s drawdowns was HK$77.019 billion, up 8.1% year over year. Net interest income was HK$52.911 billion, up 1.1% year over year. Net interest margin was 1.4%, down 6 basis points year over year. If foreign exchange swap factors are included, net interest margin was 1.58%, down 6 basis points year over year. Operating expenses were HK$18.193 billion, up 4% year over year. The cost-to-income ratio was 23.62%.

Last year, the Group’s net fee and commission income increased by 13.9% year over year to HK$11.27 billion. Securities brokerage, insurance and fund distribution and management commission income increased by 45.2%, 95.6%, 43% and 252.4% respectively year over year. Trust and custody service income fell by 0.8% year over year. Payment service commission income increased by 4.2% year over year. Trading currency business income fell by 6.9% year over year. Bill commission income rose slightly by 1.8% year over year.

Non-performing loan ratio up 9 basis points from end of last year

On loan quality, in the first half of the year Bank of China (Hong Kong)’s net impairment allowance on loans and other accounts reached HK$8.248 billion, up 66.8% year over year. The non-performing loan ratio was 1.14%, up 9 basis points from the end of last year. The balance of non-performing loans was HK$19.558 billion.

Net impairment allowance on loans surged 63% year over year to HK$8.294 billion. Total loan impairment allowance to customer loans ratio was 1.09%, up 0.2 percentage points year over year. Bank of China said that the net impairment allowance for Stage 2 was HK$3.517 billion, up 3.67 times year over year, mainly because the commercial real estate market is still weak; the internal ratings of certain real estate industry customers declined; at the same time, pressure-testing methods were applied for some high-risk real estate customers to increase provisioning. The net impairment allowance for Stage 3 was HK$3.838 billion, up HK$0.908 billion year over year, mainly due to certain stock non-performing customers from last year, with the valuation of their collateral decreasing or debt restructuring leading to additional provisioning.

Xu Haifeng said that within this year, the economies of Mainland China and Hong Kong will continue to develop in a steady and positive direction. However, conditions outside are complex and ever-changing and international political situations are subject to repeated swings, so the bank will closely monitor developments. The bank expects there will still be some upward pressure on the non-performing loan ratio, but it will remain better than the market level. The bank will also prudently make adequate provisions. If the global economy does not experience major fluctuations, credit costs for the whole of this year are expected to fall compared with last year.

Asked about the impact of the war in the Middle East, Sun Yu, vice chairman and president of the company, said that Bank of China (Hong Kong)’s risk exposure in the Middle East is very small and risks are controllable. Although the situation in the Middle East has been continuing to evolve recently and has been unsettling international investors’ sentiment, Hong Kong’s financial markets still maintain stable operations, and capital flows remain stable and sufficient. If the conflict between the CCP continues, market expectations for the Federal Reserve to delay rate cuts will heat up, and with U.S. dollar interest rates staying at a relatively high level in the short term, the expected pace of the full-year decline in Hong Kong dollar interest rates will slow down. However, Hong Kong’s bamboo-gourd safe-haven status will be further highlighted, which is expected to attract more capital inflows and bring development opportunities for markets such as wealth management and commodities.

Sun Yu said that as of the end of 2025, the Group’s total assets were RMB 4,4898.09 billion, up 7% year over year. Total customer deposits increased 7.9% year over year to RMB 2,9404.63 billion. Total customer loans increased 2.3% year over year to RMB 1,7157.87 billion. Last year, the average return on shareholders’ equity and the average return on total assets were 11.51% and 0.95%, respectively. The impairment loan ratio was 1.14%, better than the market average level.

The Group’s total capital ratio last year was 25.98%. The Tier 1 capital ratio and the Common Equity Tier 1 capital ratio were both 24.01%.

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