JPMorgan’s research report indicates that Hong Kong banks will begin releasing their 2025 fiscal year results sequentially from mid-February. It is anticipated that profitability trends will diverge due to changes in net interest margins and fluctuations in credit costs, though dividend policies are not expected to undergo significant changes. Standard Chartered (02888.HK) and Dah Sing Bank (02356.HK) are projected to deliver the strongest performance with profit growth forecasts exceeding 30%, whereas Bank of East Asia (00023.HK) may perform the weakest with an expected decline in profits. Notably, Dah Sing Bank and Standard Chartered are expected to exhibit particularly strong total shareholder returns for the 2025 fiscal year.

Looking ahead, JPMorgan anticipates that while bank management remains cautious about asset quality, they are not pessimistic, and their outlook on revenue prospects will gradually become more positive. Among large Hong Kong banks, JPMorgan continues to favor Standard Chartered and HSBC Holdings (00005.HK) over Bank of China (Hong Kong) (02388.HK).

JPMorgan notes that most banks’ revenue momentum should surpass expectations, benefiting from better-than-expected Hong Kong Interbank Offered Rate (HIBOR) migration and fee income. Pre-provision profits demonstrate resilience, with Dah Sing Bank and Bank of China (Hong Kong) expected to achieve robust pre-provision profit growth in the second half of last year, led by Dah Sing Bank showing the highest forecasted pre-provision profit growth for the 2025 fiscal year.

Nevertheless, the bank highlights that Hong Kong banks’ expected credit losses remain elevated. Although bank management believes risks related to overall commercial real estate asset quality in Hong Kong are manageable, they remain cautious about credit costs for the second half of last year. The bank predicts that Hong Kong banks’ credit costs for last year will increase year-on-year, potentially rising further in the second half of 2025.

Furthermore, the bank believes that Hong Kong banks’ capital positions continue to strengthen, but there has been little change in management’s guidance on dividend policy. Consequently, the bank expects dividend per share growth to slightly exceed earnings per share growth, implying a cash yield range of 4.4% to 7.6% for the covered banking stocks.

Overall, JPMorgan has raised its forecasts for Hong Kong banks’ pre-provision profits in the second half of 2025 and increased its net interest margin projections for the same period by 6 to 35 basis points. The bank also views Dah Sing Bank as the only institution likely to achieve year-on-year net interest margin expansion in the 2025 fiscal year, supported by favorable factors such as ongoing improvements in its deposit structure.

JPMorgan’s ratings and target prices for Hong Kong banking stocks:

Stock | Investment Rating | Target Price (HKD)

Bank of East Asia (00023.HK) | Underweight | HKD 10.1

Dah Sing Financial (00440.HK) | Overweight | HKD 43.7

Dah Sing Bank (02356.HK) | Overweight | HKD 13.8

BOC Hong Kong (02388.HK) | Neutral | HKD 43.3

HSBC Holdings (00005.HK) | Overweight | HKD 165

Standard Chartered Group (02888.HK) | Overweight | HKD 265