Left Brain Right B - the DBS Vickers Securities Equities Research

Regional Equity Strategy 4Q 2009
Bank of China Hong Kong
Income Statement (HK$ m) Balance Sheet (HK$ m)
FY Dec 2008A 2009F 2010F 2011F FY Dec 2008A 2009F 2010F 2011F
Net Interest Income 20,157 18,280 19,700 21,456 Cash/Bank Balance 153,269 114,952 120,699 127,338
Non-Interest Income 5,369 9,674 11,377 12,426 Government Securities 0 0 0 0
Operating Income 25,526 27,954 31,076 33,882 Inter Bank Assets 89,718 116,633 123,048 129,816
Operating Expenses (8,771) (11,164) (9,728) (10,554) Total Net Loans & Advs. 469,493 492,073 515,648 543,007
Pre-provision Profit 16,755 16,790 21,349 23,328 Investment 389,321 389,583 409,062 429,515
Provisions (12,573) (1,485) (493) (550) Associates 88 61 64 67
Associates 7 4 5 6 Fixed Assets 30,522 38,882 40,991 44,633
Exceptionals (111) 524 0 0 Goodwill 0 0 0 0
Pre-tax Profit 4,078 15,833 20,860 22,785 Other Assets 14,833 16,316 16,969 17,648
Taxation (1,071) (2,612) (3,442) (3,759) Total Assets 1,147,244 1,168,500 1,226,482 1,292,024
Minority Interests 336 (378) (435) (500) Customer Deposits 802,577 838,693 880,628 929,062
Preference Dividend 0 0 0 0 Inter Bank Deposits 88,779 79,901 83,896 88,091
Net Profit 3,343 12,842 16,983 18,525 Debts/Borrowings 27,339 28,706 30,141 31,648
Net Profit bef Except 3,454 12,318 16,983 18,525 Others 144,017 127,583 132,160 136,982
Minorities 1,813 1,904 1,999 2,099
Shareholders' Funds 82,719 91,714 97,658 104,142
Total Liab& S/H’s Funds 1,147,244 1,168,500 1,226,482 1,292,024
Profitability & Efficiency Ratios (%) Financial Stability Measures (%)
FY Dec 2008A 2009F 2010F 2011F FY Dec 2008A 2009F 2010F 2011F
Margins, Costs & Efficiency
Balance Sheet Structure
Yld. On Earnings Assets 3.33 2.22 2.30 2.36 Loan-to-Deposit Ratio 58.8 59.1 59.1 59.1
Avg Cost Of Funds 1.64 0.65 0.65 0.65 Net Loans / Total Assets 40.9 42.1 42.0 42.0
Spread 1.68 1.56 1.64 1.70 Investment / Total Assets 33.9 33.3 33.4 33.2
Net Interest Margin 1.90 1.65 1.72 1.78 Cust . Dep./Int. Bear. Liab. 84.2 85.2 85.3 85.5
Cost-to-Income Ratio 34.4 39.9 31.3 31.1 Interbank Dep / Int. Bear. 9.3 8.1 8.1 8.1
Employees ( Year End) 13,463 13,194 12,930 12,671 Asset Quality
Effective Tax Rate 26.3 16.5 16.5 16.5 NPL / Total Gross Loans (%) 0.5 0.4 0.4 0.4
Business Mix Specific provision/NPL (%) 37.4 96.8 144.5 183.6
Net Int. Inc / Opg Inc. 79.0 65.4 63.4 63.3 General provision ratio (%) 0.3 0.3 0.3 0.3
Non-Int. Inc / Opg inc. 21.0 34.6 36.6 36.7 Total provision/NPL (%) 107.6 180.1 221.0 257.1
Fee Inc / Opg Income 20.3 21.0 21.5 22.1 Capital Strength
Oth Non-Int Inc/Opg Inc 0.7 13.6 15.1 14.6 Total CAR 16.2 17.4 17.7 18.1
Profitability Tier-1 CAR 10.9 11.5 11.9 12.3
ROAE Pre Ex. 3.9 14.1 17.9 18.4
ROAE 3.8 14.7 17.9 18.4 Growth
ROA Pre Ex. 0.28 1.10 1.45 1.51 Gross Loans 12 5 5 5
ROA 0.27 1.14 1.45 1.51 Customer Deposits 1 5 5 6
Z-Score (X) CASH CASH CASH CASH
Interim Income Statement (HK$m)
Key Assumptions
FY Dec 1H2007 2H2007 1H2008 2H2008 FY Dec 2008A 2009F 2010F 2011F
Net Interest Income 8,903 10,492 10,029 10,128 NIM 2.0% 1.7% 1.8% 1.9%
Non-Interest Income 3,157 4,702 4,010 1,359 Loan growth 11.9% 5.0% 5.0% 5.5%
Operating Income 12,060 15,194 14,039 11,487 Fee growth -17.5% 13.1% 13.9% 12.0%
Operating Expenses (3,418) (4,355) (4,088) (4,683) Cost-to-income 34.4% 39.9% 31.3% 31.1%
Pre-Provision Profit 8,642 10,839 9,951 6,804 Credit cost 2.8% 0.3% 0.1% 0.1%
Provisions 166 (1,614) (2,227) (10,346)
Associates (2) 5 8 (1)
Exceptionals 421 669 702 (813)
Pretax Profit 9,227 9,899 8,434 (4,356)
Taxation (1,599) (1,710) (1,253) 182
Minority Interests (162) (209) (93) 429
Net Profit 7,466 7,980 7,088 (3,745)
Source: Company, DBS Vickers
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