UBS: Hong Kong Banks' Revenue Momentum Expected to Continue Slowing in Q4; Reiterates "Buy" Ratings on BOC HONG KONG (02388) and BANK OF E ASIA (00023)

UBS issued a research report stating that it expects Hong Kong banks' revenue momentum to continue slowing in the fourth quarter, but overall remain solid. The bank reiterated its "Buy" ratings on BOC HONG KONG (02388) and BANK OF E ASIA (00023), believing that solid earnings per share and dividend per share growth prospects should support share price performance amid market volatility. The bank expects that even if the Fed raises rates once more in December, net interest margins will still narrow by a few basis points quarter-on-quarter due to the decline in HIBOR and deposit competition. Net interest income is still expected to be resilient, with asset growth supporting further quarter-on-quarter expansion. Fee income momentum may weaken further as capital market activity cools, with average daily turnover so far this quarter down 23% from third-quarter levels. Trading income is also expected to remain subdued due to limited spreads and ample liquidity. On the positive side, credit costs remain a key support for earnings growth, as the base in the fourth quarter and second half of last year was relatively high; however, both BOC HONG KONG and BANK OF E ASIA slightly raised their credit cost guidance for the fourth quarter or second half after the renewed rate hike.