[ET Net News Agency, 11 January 2018] Nomura Research lifted its target price for
Chongqing Rural Commercial Bank (CQRC)(03618) to HK$5.34 from HK$4.6 on better NIMs and
improving risk profile, and maintained its "reduce" rating.
The research house said loans accounted for 39% of CQRC's average interest earnings
assets (AIEA) as of 1H 2017, far below the sector average of 53% - which has affected
CERC's NIM recovery negatively.
On the asset side, only 39% of CQRC's AIEA was loans - which yield a decent 5.17% p.a.,
33% being investments carrying 4.86% p.a. return and another 17% interbank assets of lower
3.88% p.a. yield.
Compared to either the big-four banks (whose loans accounted for 57% of AIEA) or mid-cap
bank peers (at 52%), CQRC holds a notably smaller loan book relative to its assets, but
larger investments (both bonds and nonstandard credit assets) and interbank assets.
Nomura raised its FY2018/19 NIM by 8/19bp as CQRC unwinds NIM-dilutive assets. (KL)