<Earnings First Take> Hang Seng Bank (11 HK) FY23 results in line
- FY23 revenue and profit in line with market expectation. Earnings increased by 58% y-o-y to HKD 17.8bn
- NPL ratio lowered to 2.83% by end of FY23 from 2.85% at 1H23 end. We see some marginal improvement in its asset quality
- Expect flattish y-o-y earnings growth ahead when the interest rate begins a downward cycle
FY23 results in line. Hang Seng Bank reported FY23 profit to shareholders as HK$ 17.8bn (58% y-o-y growth) , in line with market expectation of c.HK$ 17bn for FY23. Revenue increased by 18.9% y-o-y to HK$ 40.8bn. NIM increased by 55bps y-o-y to 2.30% and NII increased by 26% y-o-y to HK$ 32.3bn. Gross loan balance by the end of FY23 dropped by c.7.5% y-o-y to HK$ 874bn, in line with the overall HK loan trend. NPL ratio reached 2.83% vs 2.85% by 1H23 and 2.56% at FY22 year end. The increase in ECL charges was mainly related to mainland China commercial real estate exposure (“CRE”). ROE increased to 11.3% in FY23% from 7.1% in 1H22.
Expect marginally better risk position in China CRE. HSB’s revenue and profit growth is largely in line. NPL ratio is lower than 1H23’s level. Looking ahead, we see lower concerns on HSB’s asset quality and China CRE exposure as the bank is continuing to derisk from the risky sectors. We expect overall flattish earnings growth in FY24/25F when the interest rate begins a downward cycle. The stock is now trading at c.0.9x FY24F P/B vs 5-yr average at 1.6x. Div yield around 8.6% for FY24F. We currently have HOLD rating with rating and TP under review.