[ET Net News Agency, 6 September 2018] CLSA lowered its target price for Chongqing
Rural Commercial Bank (CQRC)(03618) to HK$4.3 from HK$5, and downgraded its rating to
"underperform" from "outperform".
The research house sees more stress in asset quality at CQRC as Chongqing's GDP growth
has slowed to a single digit. It was easily a double digit for the past 10 years until
2017 and 1H 2018 saw a further decline. This means the NPL ratio will keep going up for at
least 2018 and 2019.
Provision coverage will have to be run down to support the bottom line. And even that
net profit growth is only just mid- to low-single-digit, ie no longer double-digit and on
par with big banks.
Management at CQRC has also become increasingly difficult to reach as the city's macro
picture turns. CLSA said the surge in NPL ratio for rural commercial banks as a whole -
from 3.26% to 4.29% in just one quarter (2Q) will also dampen sentiment in the group.
CQRC's NPL ratio has been going up every quarter since 2H 2017. The uptrend is likely to
remain through 2019, CLSA predicted. (KL)