Morgan Stanley: Expected that HKEX's net interest income in the first quarter will be under pressure on a quarterly basis, with strong market business income offsetting this.

Morgan Stanley released a research report stating that Hong Kong banks will gradually announce their first quarter performance for 2026 between late April and May 5. Net interest income is expected to decline for the quarter, but strong wealth management and market business income should offset this. The macro environment still remains uncertain, and credit quality will be a key focus for the market. The bank has a favorable view on international banks. They also maintain a "hold" rating for HSBC HOLDINGS (00005) and STANCHART (02888), and a "sell" rating for BOC HONG KONG (02388). The report points out that the characteristics of the first quarter performance of Hong Kong banks in 2026 include pressure on net interest income for the quarter due to a 66 basis point decline in HIBOR, but this impact is expected to be offset by strong wealth management and market income, as well as good cost control. Credit quality will continue to be a market focus, including early credit provisions by HSBC HOLDINGS and STANCHART, commercial real estate risk exposure for BOC HONG KONG, and management comments on geopolitical impacts. The capital position of the three banks is expected to remain robust, with HSBC expected to pay a quarterly dividend of $0.10 per share, and BOC HONG KONG expected to pay a quarterly dividend of $0.29 Hong Kong dollars per share. The bank has raised its profit forecast for BOC HONG KONG, reflecting expectations of one less interest rate cut in 2026.