J.P. Morgan HK Banks Monthly: April 2026 - Easing Geopolitical Concerns and Slightly Improving Industry Trends
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J.P. Morgan notes that Hong Kong bank stocks outperformed in April 2026, driven by easing geopolitical concerns and slightly improving industry trends. Signs of easing US-China tensions reduced political risk premiums. Loan growth showed marginal recovery, improving from negative 2% year-on-year in March to negative 1% in April. The net interest margin stabilized month-on-month at 1.45%, up slightly from the first quarter's 1.40%.
Despite these positives, earnings growth remains constrained. First-quarter net profit for the sector fell 5% year-on-year due to rising credit costs and weak fee income. However, valuations appear attractive. The sector trades at approximately 0.8 times price-to-book, below the historical average of 1.0 times, while offering a dividend yield near 5.5%. Additionally, overall non-performing loans slightly decreased to 0.8%. Mainland investors injected around HKD 5 billion into Hong Kong bank stocks via southbound flows.
J.P. Morgan maintains specific ratings. HSBC Holdings (0005.HK) is rated Overweight with a target price of HKD 85. BOC Hong Kong (2388.HK) is Neutral at HKD 30, facing competitive pressure. Hang Seng Bank (0011.HK) is Underweight at HKD 110 due to elevated cost ratios.
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