JP Morgan: The privatization of Hang Seng Bank (00011) has a positive impact on the profitability of HSBC Holdings (00005). We maintain a "hold" rating with a target price of 122 Hong Kong dollars.

JPMorgan released a research report stating that the privatization of HSBC HOLDINGS (00005) by CK Hutchison (00011) is expected to have a positive impact on profits. JP Morgan expects CK Hutchison to outperform the Hang Seng Index; maintains a "overweight" rating with a target price of HK$122. According to the bank's calculations, even without considering any revenue synergies or cost optimizations, privatization will increase CK Hutchison's after-tax net profit (NPAT) by 3.7% by 2027, earnings per share by 0.1%, and average return on tangible equity (ROTE) by 38 basis points. In addition, privatizing HSBC will release CK Hutchison's common equity tier 1 capital ratio (CET1) by approximately 40 basis points. Therefore, JP Morgan believes that privatization will help CK Hutchison optimize capital allocation and improve the long-term profitability of its Hong Kong business. JP Morgan believes that the exchange rate decline already reflects the downside risks associated with the transaction, and expects the stock price to trade sideways in the short term. Although there may be a lack of positive catalysts in the short term, and no share buyback support, CK Hutchison's performance may lag behind its peers. However, CK Hutchison's long-term yield still reaches 5%, and the downside risks brought by tariffs have been taken into consideration.