Hang Seng Bank provides a range of commercial and financial services and is part of the HSBC group.
Credit Suisse First Boston has placed a buy recommendation on the stock with a 12-month price target of $105. Hang Seng Bank is expected to outperform HSBC due to better prospects for return on equity.
Credit Suisse said the special interim dividend payment of $4.10 announced earlier this month indicates that the management is comfortable with a leaner capital structure which should generate greater return on equity.
A change in management policy in the HSBC group has made Hang Seng Bank more accountable for the level of capital it holds and the returns generated on the capital, which should mean better returns for shareholders.
The brokerage forecasts that for the years 1999 to 2003 the average return on equity will rise from 21.3 per cent to 23.7 per cent.
Prior to the announcement of a special dividend payment, Credit Suisse had forecast a final dividend of $6 to be announced with this year's annual results - the brokerage has now slashed that to $2.80. The special dividend is payable on November 5.
