Citigroup: Maintains "Buy" rating on BANK OF E ASIA (00023) with a target price of HKD 16.

Citi released a research report stating that it maintains a "Buy" rating on BANK OF E ASIA (00023) with a target price of HKD 16. The bank indicated that the attributable profit for shareholders of BANK OF E ASIA in the first half of the year increased by 155% quarter-on-quarter to HKD 2.4 billion, a year-on-year increase of 7%, which is 8% higher than market expectations. Revenue exceeded expectations by 2%, mainly driven by strong non-interest income, while operating expenses were also 2% lower than expected. The group announced an interim dividend of HKD 0.46 per share, increasing the payout ratio from 45% in the same period last year to 50%. Citi pointed out that the company's non-interest income performed exceptionally well, with fee income rising 23% quarter-on-quarter and 16% year-on-year to HKD 1.9 billion, exceeding market expectations by 5%. This growth was mainly driven by robust increases in wealth management-related fee income, with insurance and bank fee income rising by 25% year-on-year and investment product fees increasing by 31% year-on-year. Other non-interest income rose 23% year-on-year to HKD 1.5 billion, surpassing market expectations by 10%. Total operating expenses were flat year-on-year at HKD 4.8 billion, which was 2% lower than expected, mainly benefiting from a decline in property expenses and internet platform costs. On the downside, the company's net interest income fell by 4% quarter-on-quarter to HKD 7.7 billion, which was 1% lower than market expectations, while the net interest margin narrowed by 7 basis points quarter-on-quarter. Loan growth was flat quarter-on-quarter and increased by 2% year-on-year, which was lower than the loan growth of local banks; deposits fell by 2% quarter-on-quarter. Credit costs remained high, annualized at 108 basis points, mainly affected by impairments related to commercial real estate in mainland China, with the non-performing loan ratio slightly increasing by 2 basis points quarter-on-quarter to 2.71%.