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03988 BANK OF CHINA
RTNominal down3.190 -0.030 (-0.932%)
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10/01/2020 17:50

{I-bank focus}Morgan lifts target prices for Chinese banks

[ET Net News Agency, 10 January 2020] With US-China trade tension easing and a
potential upturn in the inventory cycle, Morgan Stanley is expecting a modest recovery
amid reduced external uncertainty.
This, combined with a slight pickup in infrastructure investment, should continue to
drive healthy credit demand in China. Although the research house still expects modest NIM
(net interest margin) pressure on Chinese banks, Morgan believes healthy credit demand
should support more resilient market rates and healthy asset growth, which should continue
to support reasonable NII (net interest income) growth and healthy ROE (return on equity),
particularly given the recent regulatory crackdown on high-cost structure and demand
deposits.
Morgan's bottom-up stress test shows that the financial cleanup efforts and proactive
NPL digestion in recent years have prepared China's financial system in the event of a
quick GDP slowdown, with NPL pressure manageable. This would lead to lower NPL formation
and credit costs for banks if GDP growth could stabilize in 2020.
It expects valuation re-rating likely for some major banks after underperformance in
2919. Policy intervention, a de-rating factor for major banks in 2019, could moderate in
2020, judging by the lower requirements on SME loan growth. Stable profit, dividend growth
and potential fund flow from newly set-up wealth management subsidiaries should also
support banks' valuations.
Morgan revised its target prices and rating for the banks it covers as follows:
Name Rating Target Price
----------------------------------------------------------------------------
ICBC (01398) Overweight HK$7.90 from HK$6.90
CCB (00939) Overweight HK$9.00 from HK$8.40
BOC (03988) Overweight from Equal-weight HK$4.40 from HK$4.10
ABC (01288) Equal-weight HK$4.00 (unchanged)
PSBC (01658) Overweight HK$7.60 from HK$6.40
BoCom (03328) Equal-weight HK$6.40 (unchanged)
CMB (03968) Overweight HK$50.5 from HK$50.2
CITIC Bank (00998) Overweight HK$6.40 from HK$5.80
Minsheng (01988) Equal-weight HK$6.80 from HK$5.90
Everbright Bank (06818) Overweight HK$5.00 from HK$4.60
CRCB (03618) Equal-weight HK$4.50 from HK$5.20
BOCQ (01963) Equal-weight HK$5.10 from HK$5.80
Huishang Bank (03698) Underweight HK$2.60 from HK$2.80

(KL)

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