[ET Net News Agency, 15 March 2018] Daiwa Research lifted its target price for Postal
Savings Bank of China (PSBC)(01658) to HK$5.5 from HK$5.1 to reflect a relaxing of
regulatory provisions, and reaffirmed its "outperform" rating.
The research house expects PSBC to be one of the Chinese banks in need of capital within
the next two years, mainly due to its late IPO and incentive to lift LDR (44% at end-3Q
2017, versus average of 73% for big-4 banks).
Daiwa said PSBC's loan growth was faster than peers during 2017, but the bank's capital
remains a constraint to maintain its loan growth rate. PSBC's core capital ratio of 8.73%
at end-3Q 2017 lagged behind that of the big-4 banks (10.58-12.88%).
It noted that PSBC's provision coverage ratio stood at 312% at end-3Q 2017, the highest
among banks in Daiwa's coverage. The extra provisions above the 150% provisioning
threshold were around CNY40bn, which will act as a buffer for the upcoming provisioning
hike due to increased regulatory scrutiny on non-standard credit assets (NSCAs) and the
likely off-balance sheet assets moving back to the balance sheet. (KL)