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Hang Seng Bank Ltd 00011 Stock Quote

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Morningstar‘s Stock Analysis 00011

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Is it the right time to buy or sell?

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Hang Seng Bank’s First-Half Results Below Expectations

Michael Wu, CAIA Senior Equity Analyst

Analyst Note

| Michael Wu, CAIA |

Hang Seng Bank’s first-half results were below our expectations, with net profit declining 46% against the same period last year. While we had expected weaker fees, the near 30% decline in net fee income was more severe than our anticipation as bank branches were closed during the fifth wave and economic uncertainties led to weaker investor sentiment. Management noted it expects challenges to remain for the second half, given inflationary pressure and geopolitical tensions. We continue to see the higher interest rate environment as a positive near-term driver for Hang Seng Bank. We expect higher rates to continue to flow through to Hibor in the second half, and accelerate in 2023, thus pushing the bank’s net interest margin, or NIM, further higher. We have revised our assumptions for higher NIM, though this is offset by a weaker fee income and loan growth assumptions and higher credit cost. Our fair value estimate for Hang Seng Bank is maintained at HKD 177 but we lower our 2022 dividend forecast slightly to HKD 5.44. This implies the bank trades at a 26% discount to our fair value estimate and a 4.2% dividend yield, as at the close of business on Aug. 1.

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Company Profile 00011

Business Description

Hang Seng Bank is a Hong Kong-based financial institution. Founded in 1933, the bank has a long history in Hong Kong and operates three main segments, retail banking and wealth management, commercial banking, and global banking and markets. The majority of the group's profit is generated in Hong Kong and mainland China. HSBC is a majority shareholder, with a 65% stake in Hang Seng Bank. The former acquired a 50% stake in 1965, and has subsequently increased its shareholding.

83 Des Voeux Road Central
Hong kong, Hong Kong
T +852 21981111
Industry Banks - Regional
Most Recent Earnings
Fiscal Year End Dec 31, 2022
Stock Type
Employees 9,123