外文报告：CCB-Hong Kong Banks：Back to reality, slower growth ahead(1H12 earnings preview)-120719

China/Hong Kong
Hong Kong Banks



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Hong Kong Banks
19 July 2012
Back to reality, slower growth ahead (1H12 earnings preview)
 Global macro slowdown a drag on growth. Hong Kong
banks have performed well relative to the index YTD
(+13.0% versus +4.4% for the HSI) driven by improved
sentiment towards banks and lower funding costs. As we
head into the second half of 2012, we become more
cautious as a weakening global macroeconomic backdrop
provides a meaningful headwind to earnings in the form of
lower loan growth and the continued normalization of loan
provisioning. Investors will have to once again be selective
going into earnings as playing “good defense” will be more
appropriate given the growth outlook.
 Prefer StanChart to HSBC. Among the international
banks, we prefer Standard Chartered (StanChart) to HSBC
going into earnings as the former has already reiterated its
confidence with full-year consensus and has room to
manage expectations given the flexibility of its current
investment program. In addition, as StanChart has
underperformed HSBC by 9% YTD, the valuation premium
StanChart commands over HSBC (refer to right margin)
more than compensates for the increased growth profile.
 Prefer BOCHK to HSB. Within the large-cap Hong Kong
banks space, we prefer BOC Hong Kong (BOCHK) over
Hang Seng Bank (HSB) as RMB deployment continues to
underpin healthy top-line growth at BOCHK. We downgrade
HSB to Neutral on the back of weaker loan growth and a
smaller rebound in margins compared with peers. While the
current 4.9% yield will provide good share price support, we
are of the view that positive catalysts are lacking for further
material share price appreciation.
 Prefer DSBG among the smaller banks. We upgrade
shares of Dah Sing Banking Group (DSBG) to Outperform
as lower system-wide funding costs should benefit DSBG
the most given its funding profile as we upgrade our
FY12/13 earnings estimates by 6%/4%. Trading at a very
modest 0.55X FY12 PBV, we view the downside as being
limited as all the “bad news” has largely been priced into the
stock.
 Revisions of FY12/13 earnings and target prices. On the
back of lower loan growth assumptions and normalizing
loan impairment charges, we lower our FY12/13 earnings
estimates for Bank of East Asia (by 2%/8%), HSB (by
3%/2%) and Wing Hang Bank (WHB) (4%/5%). We lower
our target prices for these three banks by 7%/5%/8%
respectively. We leave our earnings estimates and target
prices for the larger banks (BOCHK, HSBC and StanChart)
unchanged. HSBC and HSB will be the first to report on
30 July 2012.
Valuation summary – Hong Kong banks
HK$
BEA
(23 HK)
BOCHK
(2388 HK)
DSBG
(2356 HK)
HSB
(11 HK)
WHB
(302 HK)
Rating Neutral Outperform Outperform Neutral Neutral
Share price* 26.45 23.30 7.09 106.60 73.85
Latest target price 27.00 26.00 8.00 112.00 76.00
Upside/downside (%) 2.1 11.6 12.8 5.1 2.9
P/E – 2012F (x) 12.6 12.5 7.9 12.5 12.7
P/E – 2013F (x) 12.0 11.1 7.5 11.8 11.7
P/B – 2012F (x) 1.13 1.79 0.55 2.50 1.22
P/B – 2013F (x) 1.08 1.69 0.52 2.29 1.14
ROE – 2012F (%) 9.1 14.7 7.1 20.3 9.9
ROE – 2013F (%) 9.2 15.7 7.2 20.2 10.0
Source: Bloomberg, CCBIS estimates
Valuation summary – International banks
HK$ HSBC (5 HK) StanChart (2888 HK)
Rating Neutral Outperform
Share price* 66.55 177.10
Latest target price 73.00 200.00
Upside/downside (%) 9.7 12.9
P/E – 2012F (x) 9.3 10.4
P/E – 2013F (x) 8.3 9.5
P/B – 2012F (x) 1.02 1.24
P/B – 2013F (x) 0.96 1.08
ROE – 2012F (%) 11.8 12.6
ROE – 2013F (%) 11.5 12.9
* Closing price on 18 July 2012
Source: Bloomber g, CCBIS estimates










Adam Chan, CA
(852) 2533 2439
adamchan@http://wendang.chazidian.com

Silvia Fun
(852) 2533 2480
silviafun@http://wendang.chazidian.com