Wed Jun 19, 2019 16:44
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BOC HONG KONG (2388)

Principal Activities

Principally engaged in the provision of banking and related financial services.

Latest Results

1Q results for the 3 months ended 31-03-2019. No dividend was declared. (Announcement Date: 29 Apr 2019)

Business Review - For the year ended December 31, 2018

Although global financial markets experienced heightened volatility in 2018, the average daily turnover of the Hong Kong stock market recorded a notable increase over the previous year and IPO activity remained robust. This was underpinned by positive stock market performance at the start of the year, a change in the Listing Rules by The Stock Exchange of Hong Kong Limited and strong capital inflows from the Chinese mainland. However, the Hong Kong stock market experienced a correction in the second half of the year amid intensifying trade conflict and the normalisation of monetary policies in advanced economies. The Hang Seng Index declined by 13.6% over the year.

Private residential property prices in Hong Kong reached a new high during the first seven months of 2018. However, the residential property market entered into a correction phase from August onwards, with transaction volumes decreasing because of growing uncertainty in economic prospects, the normalisation of HKD interest rates and volatility in financial markets. At the same time, the HKSAR government continued to implement demand management measures while the HKMA maintained prudent supervisory measures on mortgage loans, which helped banks to strengthen the risk management of their mortgage businesses.

Offshore RMB business in Hong Kong maintained steady growth in 2018. A series of measures was introduced by the PRC to promote capital account liberalisation and RMB internationalisation. These included the removal of limits on the foreign ownership of Chinese mainland banks and asset management companies, and the relaxation of the same with regard to securities houses, fund management firms, futures companies and life insurers. The scale of mutual connectivity was further expanded, with the daily quota of the Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect increasing fourfold. At the same time, China’s A shares was included in the MSCI index and Chinese bonds are to be included in the Bloomberg Barclays Global Aggregate Index. As a result of these measures, new business opportunities opened up for the financial industry in Hong Kong, further promoting the healthy development of offshore RMB markets.

In 2018, Hong Kong’s banking industry faced a number of challenges in its operating environment, including looming trade protectionism, changes in global monetary policies, the normalisation of HKD interest rates, continuously diverging performance of emerging economies, rising geopolitical risks and intensifying market competition. However, banks in Hong Kong also gained fresh impetus from the enormous demand for financial services arising from the steady progress in the implementation of the Belt and Road Initiative and the building of Guangdong-Hong Kong-Macao Greater Bay Area, and the further development of two-way capital market access between the Chinese mainland and Hong Kong.

In 2018, the Group’s profit attributable to equity holders amounted to HK$32,000 million, an increase of HK$837 million, or 2.7%, year-on-year. It increased by 12.0% compared with the profit attributable to equity holders from continuing operations in the previous year. Net operating income before impairment allowances was HK$54,411 million, an increase of HK$5,405 million, or 11.0%, year-on-year. Net interest income rose, benefitting from rising market interest rates and the positive results of the Group’s proactive management of its assets and liabilities. The net trading gain of the banking business also increased, owing to rising foreign exchange income. Net fee and commission income decreased year-on-year, primarily due to lower loan commissions, which partially offset the above-mentioned income growth. Operating expenses increased as a result of the Group’s ongoing investment in supporting its long-term business expansion. Net charge of impairment allowances increased year-on-year while the net gain from fair-value adjustments on investment properties decreased on a year-on-year basis.

In the second half of 2018, the Group’s net operating income before impairment allowances decreased by HK$703 million, or 2.6%, compared to the first half of 2018. A rise in net interest margin and growth in average interest-earning assets resulted in an increase in net interest income, which was offset by a decrease in net fee and commission income and in the net trading gain of the banking business. Moreover, operating expenses and net charge of impairment allowances increased from the first half of the year, while net gain from fair-value adjustments on investment properties decreased. As a result, the Group’s profit attributable to equity holders decreased by HK$3,056 million or 17.4%, on a half-on-half basis.

Net interest income amounted to HK$39,394 million in 2018, an increase of HK$4,576 million, or 13.1%, year-on-year. This increase was driven by the improvement in net interest margin and growth in average interest-earning assets.

Average interest-earning assets expanded by HK$212,708 million, or 9.6%, year-on-year. An increase in deposits from customers supported an increase in advances to customers and debt securities investments.

Net interest margin was 1.62%. If the funding income or cost of foreign currency swap contracts# were included, net interest margin would have been 1.63%, up 19 basis points year-on-year. Market interest rates rose and the Group proactively managed its assets and liabilities, which led to the widening of its loan and deposit spread. This, together with an improvement in the average yield of its debt securities investments and other debt instruments, resulted in a widening of the Group’s net interest margin. However, the rise in market interest rates prompted customers in favour of time deposits, resulting in a lower proportion of current accounts and savings deposits, which partially offset the positive impact described above.

Business Outlook - For the year ended December 31, 2018

The global economy will face a number of challenges in 2019, including rising trade protectionism, a contraction in liquidity and financial market volatility. According to the forecasts of International Monetary Fund, global economic growth for the year is projected to slow to 3.5%. The US economy is expected to maintain positive growth, albeit at a slower pace. The Chinese mainland economy is expected to continue its growth trend within a reasonable range, in line with the state’s guidance for promoting high-quality development, steady growth, active reform, structural adjustment, improvement in people’s livelihood and risk prevention. In Southeast Asia, the regional economy is gradually entering into a peak period for the construction of infrastructure projects, which will help foster strong economic growth momentum.

Banks in Hong Kong will face challenges in their operating environment, with Hong Kong’s economic outlook expected to be affected by China-US trade friction, the normalisation of Hong Kong dollar interest rates and asset market adjustments. Nevertheless, Hong Kong possesses unique advantages and will continue to play a vital role in the reform and openingup of the new era in the Chinese mainland. Major national strategies, including the implementation of the Belt and Road Initiative, the steady progress in the development plan for the Guangdong-Hong Kong-Macao Greater Bay Area, and RMB internationalisation will provide more development opportunities for the banking industry in Hong Kong. In 2018, the HKSAR government’s Policy Address put forward more than 200 specific measures, which will create a solid foundation for the longterm development of Hong Kong and provide long-term business opportunities for the banking industry.

In view of the opportunities and challenges ahead, the Group remains committed to “Building a Top-class, Full-service and Internationalised Regional Bank” by actively responding to market changes, strengthening its core business development, accelerating its regional development and business transformation, and enhancing product and service innovations while adhering to a high level of risk management, so as to achieve stable, long-term and sustainable development in each of its businesses.

The Group will remain committed to developing the local market and promoting operational and business transformation while adhering to its customer-centric philosophy. The personal banking business will revolutionise its operations by gradually transforming into a RC+P (relationship, channel + product) business model, which is in line with the Group’s three goals of transformation, that is, customer-centric, data-driven and agile cooperation. The corporate banking business will focus on improving its comprehensive financial services capabilities. The Group will lend its weight to Hong Kong’s economic development, support major projects in Hong Kong, actively expand its customer base and deepen business cooperation with the government and public entities as well as develop financial inclusion so as to fully enhance customers’ experience and satisfaction.

Advancement in technology and acceleration in fintech development is another important task of the Group. It will actively promote innovative technology projects, reshape business models and improve innovation mechanisms in order to become a leading digital bank. It will fully embrace the HKMA’s seven initiatives for preparing Hong Kong for a “New Era of Smart Banking” and introduce a diversified range of distinctive services.

The Group will seize opportunities arising from the development of the Guangdong-Hong Kong-Macao Greater Bay Area by focusing on the facilitation of people’s livelihood and cross-border financial needs and enhancing the competitiveness of its products and services. Based on BOC’s Guangdong, Hong Kong and Macao Greater Bay Area Integrated Financial Services Plan, it will deepen its collaboration with BOC’s entities in the Chinese mainland and overseas countries in order to enhance the quality of its one-stop products and services and its regional service capabilities. The Group will also provide comprehensive support for the mutual connectivity of regional infrastructure projects, industrial transformation and upgrading, technological innovation and international cooperation, with the goal of becoming the first-choice bank for customers in the Greater Bay Area.

The Group will continue to refine its regional management model to promote business development in Southeast Asia. To achieve sustainable and balanced development, the Group will continue to improve its regional management capabilities, reinforce support to its Southeast Asian entities, tailor their business development to local conditions and enrich their product offering with a view to expanding their customer base by attracting customers in countries along the Belt and Road, “Going Global” enterprises, local leading enterprises and high-net-worth clients. The Group will also accelerate the promotion of innovative cross-border RMB products and improve and expand its RMB clearing bank network in Southeast Asia in order to further enhance its leading edge in RMB business. Moreover, it will improve the overall risk management systems of its Southeast Asian entities to ensure that they comply with regulatory requirements.

Source: BOC Hong Kong (02388) Annual Results Announcement

Business Nature

The Group is a leading commercial banking group in Hong Kong. Through 343 branches, 434 ATMs and other delivery channels in Hong Kong, the Group offer a comprehensive range of financial products and services to retail and cooperate customers- BOCHK, the principal operating subsidiary, is one of the three bank note issuing banks in Hong Kong. In addition, the Group has 14 branches in Mainland China to meet the cross-border banking needs of the Hong Kong and Mainland China customers.

Prospect

The Group¡¦s China business strategy is two pronged. Nanyang will actively develop full banking services in the Mainland with an emphasis on retail banking. BOCHK, on the other hand, will continue to operate as a foreign funded bank in China and focus on corporate banking and foreign exchange businesses. This, it believe, is the best business model that will allow them to develop retail and wholesale banking simultaneously in the vast Mainland market. It will enable us to capitalise on Nanyang¡¦s unique brand awareness and expertise in RMB retail banking , wealth management and SME banking services. It will also maintain BOCHK¡¦s superior market position in servicing large corporate clients and conducting foreign exchange business in China.

Chairman
GAO Yingxin
Contact Info
Company Address:
52nd Floor, Bank of China Tower, 1 Garden Road, Hong Kong
Web: http://www.bochk.com
Quote
HSI: 28,202.14 703.37
30.80
0.60 (2.0%)
As of16:15 19 Jun 2019
Open: 31.00 52Wk High: 39.95
Day High: 31.10 52Wk Low: 27.55
Day Low: 30.70 P/E: 10.176
Prev. Close: 30.20 Yield: 4.766%
Volume: 13.76M
Mkt Cap: 319.30B
Turnover: 424.67M NAV: 24.314
Quotes are delayed by at least 15 minutes.
Contact BOC HONG KONG
Company Address:
52nd Floor, Bank of China Tower, 1 Garden Road, Hong Kong
Web: http://www.bochk.com

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