BoCom Hong Kong profitability lifted by interest and fee income

The growth of its wealth management business will benefit fee income, says Moody’s

Bank of Communications (BoCom) Hong Kong’s profitability is likely to remain good in 2025, supported by a stable interest income and fee income performance, said Moody’s Ratings.

Higher net interest margin and lower loan impairment charges incurred in 2204 have led to good profitability at the bank, the ratings agency noted. Its net income/ tangible assets improved to 1.3% in 2024, from 0.5% in 2023.

The growth of its wealth management business will also benefit its fee income, Moody's said.

“In 2025, we expect the bank's credit costs to increase moderately, whilst remaining manageable, amidst the headwinds in the macroeconomy and property sector,” Mood’s Ratings said.

BoCom Hong Kong is also expected to maintain good capital adequacy over the next 12-18 months, on the back of strong internal capital generation and modest loan growth.

Asset quality will continue to be challenged by its property-related exposures, however.

Stage 2 loans to total loans surged to 205% as of end-2024, from 9% as of end-2023, driven by its commercial property-related loans, whilst its impaired loan ratio rose slightly to 3.3% from 3.2%.

“Given the high vacancy rates, increase in office supply, declining rental yields, and fall in retail foot traffic, we expect more stage 2 loans to migrate to impaired loans, resulting in higher asset risk,” Moody’s said.

“However, the bank's prudent provisioning policy helps mitigate the asset quality risk. Its loan loss coverage ratio was high at 80% by the end of 2024,” it added.