[ET Net News Agency, 6 April 2018] Goldman Sachs said Chinese banks' NIM expansion is
accelerating for ones with strong deposit franchises, as allocation towards higher-yield
assets and repricing for longer-duration assets continue.
The 4Q 2017 saw an average 1bp qoq NIM expansion, with the big four (ICBC, CCB, BOC,
ABC) and JSB (joint stock banks) each seeing an increase of 3bp/1bp. In particular, the
qoq NIM expansion accelerated from a decline of 2bp/4bp in 1Q/2Q to an increase of 4bp/1bp
in 3Q/4Q for reported covered banks.
The average NPL rate dropped to 1.39% in 2017 versus 1.42%/1.5% in 3Q 2017/2016. The NPL
coverage ratio further improved to an average 244% vs. 230%/186% in 3Q 2017/2016 as banks
are becoming more prudent and are leveraging their provisions to actively deal with NPL.
Goldman lifted its P/PPOP target multiples by 0.5x for the top-6 banks, i.e. ICBC, CCB,
CMB, PSBC, BONB, CQRCB, to incorporate its view that China has made further progress on
deleveraging and that systemic financial risks continue to abate.
Goldman also revised its target prices and ratings for the Chinese banks it covers as
follows:
Bank Target Price Rating
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ICBC (01398) HK$7.2 to HK$8.5 Neutral to Buy
BOC (03988) HK$4.5 to HK$4.7 Neutral
CCB (00939) HK$9.3 to HK$10.8 Buy
ABC (01288) HK$4.5 to HK$4.8 Buy to Neutral
BoCom (03328) HK$6.4 to HK$6.3 Sell
CMB (03968) HK$37.5 to HK$42.2 Buy
CEB (06818) HK$4.1 to HK$4.0 Neutral
PSBC (01658) HK$5.2 to HK$6.6 Buy
CQRCB (03618) HK$6.2 to HK$7.1 Neutral

(KL)