UBS: Downgrade rating of HANG SENG BANK (00011) to "Sell" and lower target price to HK$102, expecting annual dividend to decline.

UBS released a research report, stating that it has downgraded HANG SENG BANK (00011) from "neutral" to "sell", with the target price lowered from 112 HKD to 102 HKD. UBS pointed out that Hang Seng's net profit in the first half of the year fell sharply by 34.6% year-on-year, with credit costs reaching a new high, resulting in performance below UBS and market expectations. The management maintained a cautious attitude during the performance meeting, indicating that the expected credit losses (ECL) in the second half of the year will be similar to the first half of the year, implying that the full-year credit costs in 2025 may exceed 100 basis points. Taking into account the risk exposure of Hong Kong commercial real estate, which brings provisioning pressure to Hang Seng, the earnings per share forecast for 2025 to 2026 has been lowered by 12% to 18%, and it is expected that even though the dividend payout ratio may increase to over 90%, the earnings per share for 2025 may still be difficult to maintain stability, with a projected dividend of 6.2 HKD for 2025, compared to 6.8 HKD last year. In addition, UBS pointed out that the 3 billion HKD share buyback plan is in line with expectations, and if loan demand remains weak next year, the buyback scale may be expanded.