CICC has upheld its profit forecast and "outperform industry" rating for BOC Hong Kong (02388). The company currently trades at 1.4x/1.3x 2026E/2027E P/B. Considering recent shifts in capital preferences, the target price has been raised by 11.75% to HK$50.4, corresponding to 1.5x/1.4x 2026E/2027E P/B and offering a potential upside of 5.1%. CICC's key points are outlined below.
Recent Company Developments: The bank recently held a "Corporate Going Global" corporate day, detailing its business profile and operational strengths in Hong Kong and Southeast Asia. It analyzed corporate pain points, offering tailored financial solutions with a one-stop, full-process service and a diversified product matrix for companies at various stages of international expansion.
Positioning as a Leading Regional Bank Based in Hong Kong with Strength in Southeast Asia: 1) The bank holds the second-largest market share in Hong Kong for both deposits and loans. It benefits from its status as one of the three note-issuing banks and the sole RMB clearing bank in Hong Kong, operating the most extensive branch network among Chinese-funded banks in the region. 2) Its branch network comprehensively covers major Southeast Asian economies.
Southeast Asian Business as a Rapidly Growing Incremental Engine: In 2025, the bank's Southeast Asian operations saw deposits, loans, and revenue increase by 20%, 10%, and 6% respectively from the beginning of the year. The non-performing loan ratio stood at 2.11%, indicating stable asset quality. The number of institutional clients in Southeast Asia grew by 15% year-on-year, while the number of individual payroll service clients increased by 21% year-on-year. Taking Bank of China Malaysia as an example, cross-border RMB settlement volume achieved a five-year CAGR exceeding 40%. Over the past decade, deposit and loan scales as well as revenue and profit have doubled, with a CAGR of 7%-10%. CICC believes the opportunities in Southeast Asian business could become a new engine for the bank's future development.
Substantial Demand for Diversified Financial Services Related to Corporate Globalization: China's FDI outflow CAGR over the past five years has exceeded 7%. Geographically, investment flows to Southeast Asia have been rising consistently, constituting 78% of the total and making it the largest investment destination. Sector-wise, manufacturing ranks among the top three FDI sectors, following wholesale & retail, leasing, and business services. Taking Malaysia as an example, investments in sectors like electronics manufacturing account for up to 53% of manufacturing FDI, indicating a trend towards more advanced and high-end industrial structures among globalizing Chinese companies. The bank notes that large state-owned enterprises and elite medium-sized private enterprises are currently the main drivers of overseas expansion.
BOC Hong Kong possesses comprehensive service capabilities covering the entire lifecycle of corporate overseas operations, providing full-process, all-encompassing services from fundraising and investment to management and exit. Leveraging synergies within the Bank of China Group, it covers capital guidance, asset custody, value-added services, and IPO exit channels. It coordinates local government and business resources to help companies localize quickly. With a deep presence in nine Southeast Asian countries, it serves as the chair unit for Chinese enterprise associations in several Southeast Asian nations and has built a complete investment service ecosystem involving governments, industrial parks, chambers of commerce, law firms, and accounting firms.
Capability-wise, expertise in RMB-related business is a key advantage: It provides comprehensive cash management services leveraging its RMB business strengths. Building on its globally leading position in the offshore RMB market, it deeply integrates RMB into the entire cash management process, offering full-cycle, one-stop RMB cash management services for enterprises. It supports global market operations based on its strengths in RMB and HKD businesses. Utilizing the Bank of China Group's domestic and international coordination, global correspondent bank network, and leading position in the Hong Kong market, BOC Hong Kong helps companies capitalize on policy opportunities such as cross-border cash pools and overseas lending.
Risk Warning: Under stagflation expectations, economic pressures in the Southeast Asian region may increase, potentially leading to higher risks related to overseas asset quality and exchange rates.