[ET Net News Agency, 9 February 2018] HSBC Global Research lifted its target price for
Chongqing Rural Commercial Bank (CQRCB)(03618) to HK$7.2 from HK$6.4, and maintained its
"buy" rating.
The research house cut its 2017 earnings forecast by 3% mainly on the higher
provisioning; it also cut its 2018 earnings forecasts by 4% mainly on the lower net
interest income and lower fee income, despite the lower provisioning.
HSBC said CQRCB has benefited from the strong local economic development in the
Chongqing area and western China in the past few years. CQRCB reported relatively stable
NPL ratios vs peer banks and it strong local franchise in rural areas has led to a stable
funding base and above-peers net interest margin.
That said, CQRCB has higher-than-peers exposure to Level 3 assets. As at 2016, they
represented 56.4% of total assets, reflecting the bank's position in debt securities,
trusts, asset management and WMPs issued by other banks; the bank did not provide any
further information about the amount of Level 3 assets as at 1H 2017. (KL)