Far East Horizon (3360) 1H26 results in line, better NIM expansion offset by higher credit costs and weaker industrial operations

Research evidence excerpt

J P M O R G A N

Asia Pacific Equity Research

05 August 2026

Far East Horizon (3360)

1H26 results in line, better NIM expansion offset by

higher credit costs and weaker industrial operations

Overweight

3360.HK, 3360 HK

Price (05 Aug 26):HK$6.76

▲Price Target (Dec-27):HK$10.40

Prior (Dec-26):HK$10.20

FEH 1H26 results came in largely in line with our expectations, with much better

NIM expansion offset by higher credit costs and lower-than-expected profit

contribution from the industrial operations. We fine-tune our earnings forecasts for

FY26/27E and retain our OW rating with a new PT of HK$10.4, the increase driven

mainly by rolling forward our valuation base to Dec-27.

Group 1H26 profits of RMB$2.2bn were up 3% YoY and implied an

annualized ROE of 8.5%; operating profits surged 33% YoY driven by robust

NIM expansion and double-digit fee income growth, largely offset by much

higher credit costs and lower contribution from industrial operations. The

company also declared an interim DPS of HK$0.25, flat YoY.

What was positive: robust NIM expansion and sequential fee income

growth. NIM widened 99/36bps YoY and HoH in 1H26 driven by a

combination of higher asset yields and declining funding costs; rising

contribution from financial inclusion portfolio, now representing 12.6% of

total leasing portfolio with average yields of 17% (vs. group average of 8.4%),

is the key support to asset yields, while funding costs are still on a downward

trend along with the loosening monetary policy; we see a chance for sequential

margin expansion in the coming 6-12 months. Fee income grew 25% YoY and

has trended up for four consecutive reporting periods along with the expansion

at the leasing businesses, although management does not expect the revenue

contribution to be back to as high as double-digits due to the changes in

business/customer mix.

What was negative: higher credit costs and sluggish industrial operations.

Credit costs surged eight times YoY in 1H26 due to lower recoveries and, more

importantly, the increasing impact from the financial inclusion portfolio where

credit costs were 2.9% in 1H26 vs. nil in the traditional leasing portfolio;

…