Maintain "Buy" and raise TP to HK$38.50. BOCHK's (the “Company”) 2024 net interest income was largely in line with expectations, while non-interest income exceeded our forecast. Despite the global rate-cutting cycle, the Company effectively managed liability costs and dynamically adjusted its asset portfolio. We maintain optimistic outlook on its future Net Interest Income (NII) growth, expecting stable Net Interest Margin (NIM) supported by its significant advantage in liability costs. Non-interest income showed impressive growth, and we are positive on wealth management and insurance revenue prospects amid Greater Bay Area integration and Southeast Asian expansion. Additionally, the Company raised the dividend payout ratio, enhancing its appeal to investors. We forecast 2025F-2027F BVPS of HK$34.314/ HK$36.682/ HK$39.319. We raise the Company’s target price to HK$38.50 by applying 1.12x 2025F PBR.
　　NIM remained resilient while non-interest income showed strong growth.
　　Shareholders’ profit up 16.8% YoY to HK$38.2 bn and net interest income increased 2.5% YoY in 2024, driven by slight increases in average interest-earning assets and NIM. While total customer loans decreased 1.5% YoY, investments in debt securities surged 33.0%, providing stable interest income. Adjusted NIM reached 1.64%, up 1 bp YoY, benefiting from significant advantages in liability costs, with customer deposits growing 8.8% YoY and a favorable liability structure supported by high CASA ratio. Non-interest income demonstrated impressive growth, with net fee and commission income rising 7.9% YoY, driven by continued focus on wealth management and insurance businesses. Following the acquisition of BOCI's private banking business, we expect accelerated non-interest income growth through deeper penetration in wealth management and insurance markets in HK and SEA regions.
　　Asset quality continues to lead peers as three key opportunities drive future growth prospects. The Company maintained a robust NPL ratio of 1.05% in 2024, significantly outperforming HK peers' average of 1.96%. Net impairment charges decreased 19.8% YoY, supporting overall profit growth.
　　During HK commercial property headwind, the Company demonstrated strong risk management capabilities, continuously optimizing asset quality and reducing risk exposures. Leveraging its cost advantages and superior asset quality, we believe BOCHK is well-positioned to benefit from three key opportunities: RMB internationalization, GBA integration, and Chinese enterprises' overseas expansion, which should drive sustained profit growth in the future.
　　Catalysts: 1) US Fed slower rate cut; 2) HK economy recovers. Downside risks: 1) real estate industry depressed; 2) weak credit demand in Hong Kong.