Jefferies released a research report noting that BOC Hong Kong's (02388) net profit for the first half of this year rose 7.1% year-on-year to HK$23.7 billion, broadly in line with the firm's expectations. Net interest income increased 1% half-on-half, supported by stable net interest margin (1.48%, up 1 basis point half-on-half) and steady loan growth (up 5.9% half-on-half). Net fee income declined 6% year-on-year, mainly dragged by insurance (bancassurance commissions fell 41% year-on-year) and custody services (down 22% year-on-year), though credit card services (up 12% year-on-year) and fund distribution (up 55% year-on-year) delivered strong performance.

The firm maintained its "Hold" rating and raised the target price from HK$48 to HK$51. The report pointed out that pre-provision operating profit fell modestly by 2.5% year-on-year, impacted by a cost-to-income ratio that rose to 22.5%, although net profit recovered, supported by lower credit costs (27 basis points, down 12 basis points half-on-half). Impairment allowances decreased 25.5% year-on-year, but the improvement mainly came from the normalization of preventive provisions in stages 1 and 2, with stage 3 provisions remaining at elevated levels.

The firm believes the decline in credit costs stems from slower risk migration rather than provision write-backs, and overall provision coverage remains adequate. The group announced a shareholder return plan for 2026 to 2028, which includes a progressive increase in dividend payout ratio and additional shareholder returns of no less than HK$10.5 billion over three years, with a special dividend of HK$0.2388 per share to be paid in fiscal 2026. Jefferies views the plan as broadly in line with expectations, though the amount may be at the lower end of market forecasts, lacking upside surprises.