[ET Net News Agency, 14 October 2019] Nomura cut its target price for ICBC (01398) to
HK$6.49 from HK$7.21 and maintained its "buy" rating.
The research house raised its valuation discount rate to 13.5% from 12.5% to factor in
rising macro uncertainties, while it largely maintained its FY2019-21 earnings forecasts.
It said ICBC trades at what we see as an attractive valuation of 0.65x FY2019 PB, with
ROE at 12% and dividend yield at 5.2%. Meanwhile, the H-share implied NPL ratio is 6.8%,
versus reported NPL at 1.5%.
Nomura expects ICBC to deliver earnings growth of 4% for FY2019, driven by steady loan
growth of 8.5% for FY2019. At the same time, Nomura think the bank's NIM will be under
pressure, given the weakening of loan demand, and adoption of a new loan pricing
mechanism.
Nomura thinks asset quality will remain stable into 2H, as its NPL ratio should decrease
by 4bps h-h to 1.48%, with NPL coverage increasing by 10pp to 186%. In addition, ICBC's
exposure to high-risk sectors continues to decrease and its share of the retail business
continues to increase. (KL)