[ET Net News Agency, 4 August 2020] Nomura lowered its target price for China Merchants
Bank (CMB)(03968) to HK$46.59 from HK$46.94 and maintained its "buy" rating.
The research house said the target price cut reflects a lower FY2020-22 NIM forecast by
3bp/5bp/6bp to 2.47%/2.39%/2.34%, and higher NPL ratio forecasts by 5bp/5bp/5bps to
1.2%/1.25%/1.3%.
As a result, Nomura cut its FY2020-22 earnings forecasts by 2%/4%/4%. It expects net
profit growth to slow to 8% for 2Q, compared to 10% for 1Q, as a result of (1) the lag
between NPL recognition and macroeconomic headwinds; and (2) decreasing loan pricing rates
and bond yields, which will lower asset yields and NIM.
Looking further into 2021-022, Nomura expects ROE to remain stable, given CMB's solid
profit buffer, as NPL coverage ratio was reported at 451% as of March 2020, though
mortgage loan will be repriced from March 2021, which will factor in the LPR cuts since
March. (KL)