[ET Net News Agency, 4 August 2020] J.P. Morgan lowered its target price for Hang Seng
Bank (HSB)(00011) to HK$109 from HK$120 and maintained its "underweight" rating.
The research house said HSB's 1H results came in below consensus estimates, dragged down
by weaker-than-expected PPOP (pre-provision operating profit) and higher credit costs. JPM
revised down its earnings forecasts by 13/4% for FY2020/21.
It expects relative share price underperformance to continue, given the downside risks
it sees to consensus earnings and DPS. JPM said uncertainties on PPOP momentum and asset
quality could remain high in the near future and potential impacts of the third wave of
COVID-19 infection remain to be seen, suggesting that it will take time for earnings
revisions to turn positive.
Despite the sufficient capital position, JPM believes it is difficult for HSB to deliver
higher payout ratios in FY2020 than in FY2019 due to regulatory guidance, and implied
dividend yields are less than 5% at the current share price level. (KL)