1、Asia Pacific Equity Research 12 August 2010 Bank of East Asia Overweight 0023.HK, 23 HK Results above; Outlook steady Price: HK$31.50 Price Target: HK$35.00 Hong Kong Banks Joseph LeungAC (852) 2800-8517 Sunil Garg (852) 2800-8518 J.P. Morgan Securities (Asia Pacific) Limited 222834HK$Aug-09 Nov-0
2、9 Feb-10 May-10 Aug-10Price Performance0023.HK share price (HK$HSI (rebased)YTD 1m 3m 12mAbs -0.5% 7.7% 13.9% 18.5%Rel 1.9% 3.7% 8.2% 17.5%Bank of East Asia (Reuters: 0023.HK, Bloomberg: 23 HK)Year-end Dec (HK$ in mn) FY08A FY09A FY10E FY11E FY12EOperating Profit 1,603 5,295 4,299 5,417 7,006Net Pro
3、fit 39 2,514 3,326 3,869 4,995Cash EPS (HK$) 0.02 1.36 1.65 1.83 2.36Fully Diluted EPS (HK$) 0.02 1.36 1.65 1.83 2.36DPS (HK$) 0.31 0.80 0.99 1.15 1.48EPS growth (%) (99.1%) 5736.7% 20.9% 11.3% 28.8%ROE 0.1% 7.5% 8.7% 9.1% 11.2%P/E 1,346.0 23.1 17.0 16.1 12.8BVPS (HK$) 19.21 19.01 20.63 21.57 22.51P
4、/BV 1.6 1.7 1.5 1.5 1.4Div. Yield 1.0% 2.5% 3.1% 3.6% 4.7%52-wk range (HK$) 36.50 - 23.95Market cap (HK$ mn) 63,999Market cap ($ mn) 8,241Shares outstanding (mn) 2,032Fiscal Year End DecPrice (HK$) 31.50Date Of Price 12 Aug 10Avg daily value (HK$ mn) 251.0Avg daily value ($ mn) 32.3Avg daily vol (mn
5、) 12.3HSI 21,295Exchange Rate 7.77Source: Company data, Bloomberg, J.P. Morgan estimates. See page 7 for analyst certification and important disclosures, including non-US analyst disclosures. J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, inves
6、tors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. Results above our expectations: Bank of East Asia reported 1H10 net profit of HK$2.1
7、 billion. Excluding hybrid coupon, HK$1.9 billion, +42% h/h, +64% y/y, 14%/24% above JPMe/consensus forecasts. EPS was HK$0.91 and DPS HK$0.38 implies 40% payout, in line with 1H09. We maintain Overweight. Underlying result solid: Operating profit was +8% h/h, 3% ahead our forecast, excluding own-de
8、bt gain of HK$174 million and disposal gain of BEA Canada of HK$230 million. Net interest margin was up slightly, +4bp h/h to 1.84%. Loan growth 12% vs. industrys 15%. Deposit grew 5%. Fees increase by 9% (brokerage, derivatives). Trading loss underpinned 15% drop in non-interest income. Cost increa
9、ses by 6%, broad-based. Headcount increase concentrated in China. Credit charge declined by 41bp to 11bp, and NPL dropped 11bp to 0.75%. Tier 1 ratio of 10.3% appears healthy. Outlook steady: While NIM depends on interest rate movements, flat NIM in China and increasing LDR appear helping. Deposit g
10、rowth was above the industry, reflecting strong retail franchise. China LDR is 96.5%, moving towards the 75% mark by end 2011. We see the main risk being costs staying at a relatively high level, with CIR of 61% in 1H10 (+5ppt h/h) and revenue-to-assets ratio of 1.4% (-5bp). Small earnings adjustmen
11、t: We revise our net profit forecast by +5%/-4%/-6% for FY10/11/12, reflecting lower revenues offset by lower credit charge. We maintain our Overweight rating and Dec-10 price target of HK$35. 2 Asia Pacific Equity Research 12 August 2010Joseph Leung (852) 2800-8517 Company Description P and (2) no
12、 part of any of the research analysts compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst(s) in this report. Important Disclosures Lead or Co-manager: JPMSI or its affiliates acted as lead or co-manager in a publi
13、c offering of equity and/or debt securities for Bank of East Asia within the past 12 months. Client of the Firm: Bank of East Asia is or was in the past 12 months a client of JPMSI; during the past 12 months, JPMSI provided to the company investment banking services, non-investment banking securitie
14、s-related services and non-securities-related services. Investment Banking (past 12 months): JPMSI or its affiliates received in the past 12 months compensation for investment banking services from Bank of East Asia. Investment Banking (next 3 months): JPMSI or its affiliates expect to receive, or i
15、ntend to seek, compensation for investment banking services in the next three months from Bank of East Asia. Non-Investment Banking Compensation: JPMSI has received compensation in the past 12 months for products or services other than investment banking from Bank of East Asia. An affiliate of JPMSI
16、 has received compensation in the past 12 months for products or services other than investment banking from Bank of East Asia. “In July 2010 J.P. Morgan Securities Ltd. (“J.P. Morgan“) acted as Joint Bookrunner on a Reg S Lower Tier 2 bond issuance by The Bank of East Asia, Limited (“BEA“) and as D
17、ealer Manager for a tender offer of Reg S Lower Tier 2 bonds previously issued by BEA. J.P. Morgan has received fees for so acting. J.P. Morgan or one or more of its associates may perform, or may seek to perform, other financial or advisory services for BEA and may have other interests in or relati
18、onships with BEA, and receive fees, commissions or other compensation in such capacities. J.P. Morgan or one or more of its associates may have received fees, commissions or other compensation from BEA in the past 12 months, and expects to become entitled to receive such fees, commissions or other c
19、ompensation in the future, in addition to the fees referred to above. J.P. Morgan and its affiliates may also deal in, hold or act as market maker in relation to securities issued by BEA and receive fees for doing so.“ 01734516885Price(HK$)Oct06Jul07Apr08Jan09Oct09Jul10Bank of East Asia (0023.HK) Pr
20、ice ChartN HK$19.8 N HK$20.5UW HK$39.4 UW HK$40N HK$51 N HK$38 N HK$16.5 N HK$22.6 OW HK$35Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.This chart shows J.P. Morgans continuing coverage of this stock; the current analyst may or may not have covered itover the
21、 entire period.J.P. Morgan ratings: OW = Overweight, N = Neutral, UW = Underweight.Date Rating Share Price (HK$) Price Target (HK$) 08-Feb-07 UW 42.41 39.40 02-Aug-07 UW 43.14 40.00 11-Dec-07 N 49.23 51.00 06-Aug-08 N 30.18 38.00 05-Nov-08 N 16.00 19.80 17-Feb-09 N 14.15 16.50 12-May-09 N 24.65 20.5
22、0 25-Aug-09 N 26.00 22.60 16-Apr-10 OW 28.85 35.00 Explanation of Equity Research Ratings and Analyst(s) Coverage Universe: J.P. Morgan uses the following rating system: Overweight Over the next six to twelve months, we expect this stock will outperform the average total return of the stocks in the
23、analysts (or the analysts teams) coverage universe. Neutral Over the next six to twelve months, we expect this stock will perform in line with the average total return of the stocks in the analysts (or the analysts teams) coverage universe. Underweight Over the next six to twelve months, we expect t
24、his stock will underperform the average total return of the stocks in the analysts (or the analysts teams) coverage universe. J.P. Morgan Cazenoves UK Small/Mid-Cap dedicated research 8 Asia Pacific Equity Research 12 August 2010Joseph Leung (852) 2800-8517 analysts use the same rating categories;
25、however, each stocks expected total return is compared to the expected total return of the FTSE All Share Index, not to those analysts coverage universe. A list of these analysts is available on request. The analyst or analysts teams coverage universe is the sector and/or country shown on the cover
26、of each publication. See below for the specific stocks in the certifying analyst(s) coverage universe. Coverage Universe: Joseph Leung: Bank of China (BOCHK) (2388.HK), Bank of East Asia (0023.HK), Chong Hing Bank (1111.HK), Dah Sing Banking Group (2356.HK), Dah Sing Financial (0440.HK), Hang Seng B
27、ank (0011.HK), Hong Kong Exchanges our Neutral rating falls into a hold rating category; and our Underweight rating falls into a sell rating category. Valuation and Risks: Please see the most recent company-specific research report for an analysis of valuation methodology and risks on any securities
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