JP Morgan: BOC HONG KONG (02388) performance meets expectations, a dividend yield of over 5% is enough to support the stock price.

JPMorgan Chase released a research report stating that BOC HONG KONG (02388) had 2025 annual performance in line with expectations, with operating profit growth offset by higher credit costs. The bank has adjusted its profit forecast for 2026/27 by 1%/-1% and maintains a "neutral" rating with a target price of HK$43.3. The bank stated that BOC HONG KONG had a net profit of HK$40.1 billion in 2025, a 5% year-on-year growth, slightly below the bank's expectation of 0.3%. The annualized return on equity was 11.5%, benefiting from a 9% increase in profit before provisions, but partially offset by higher credit costs. The company declared a final dividend of HK$1.255, with a dividend payout ratio of 56% in 2025, higher than 55% in 2024. Credit costs in the fourth quarter of 2025 rose to 74 basis points, with a full-year of 49 basis points, higher than 30 basis points in 2024, mainly due to increased provisions for mainland China and Hong Kong real estate loans, accounting for 4.4% and 14.6% of total loans, respectively. JPMorgan Chase believes that the operational trends and dividend policy of BOC HONG KONG in 2025 are in line with market expectations. Although the dividend yield of over 5% is not attractive, it is enough to support the stock price, and the newly approved shareholder return plan may increase market expectations for share buybacks or special dividends in mid-2026.