Bank of China Hong Kong beats profit forecast on lower credit costs

Bank of China (Hong Kong) delivered a first-half profit of HK$23.74 billion, surpassing market expectations as sharply lower credit impairments and improved fee income cushioned the impact of thin lending margins.

The lender's profit attributable to shareholders for the six months ended June 30 reached HK$2.2453 per share, beating the average analyst forecast of HK$22.94 billion.

Credit quality lifts earnings

Net impairment charges fell 26.9 per cent year-on-year to HK$2.38 billion, down from approximately HK$3.26 billion in the same period last year. The improvement reflected a healthier loan book, with the impaired loan ratio tightening to 0.89 per cent from 1.02 per cent at end-June 2025. The drop in credit costs provided crucial support after the bank faced elevated provisions in recent years.

Margin holds steady amid rate headwinds

BOCHK's net interest margin, which includes income from foreign exchange swap contracts, edged up to 1.57 per cent from 1.54 per cent a year earlier. The modest gain comes as Hong Kong banks contend with persistent margin pressure across the sector.

Industry-wide, lenders have responded by tightening cost-to-income ratios and pivoting toward fee-based businesses, according to a June review of Hong Kong's banking sector by KPMG. Credit quality across the broader market has remained broadly stable, the review noted.

BOCHK's result underscores how diversified revenue streams, particularly wealth management and insurance fees, are helping offset compressed interest income in a challenging rate environment.

Source: South China Morning Post