[ET Net News Agency, 17 August 2018] HSBC Global Research raised its NIM estimates for
China banks to reflect the impact of the changed liquidity environment. It also factored
in moderately stronger fee income growth to reflect a more accommodative implementation of
WMP rules.
Credit costs, especially for 2018, edged up to reflect banks' more conservative
provisions against a less certain macro outlook, the research house noted.
At the sector level, HSBC adjusted the RMB FX forecasts to 6.7 from 6.4. It adopted a
higher credibility discount for all banks given slower regulatory adjustment on wealth
management products (WMPs).
On cost of equity, HSBC adopted a 50bp net increase for all banks. This reflects: (1) a
50bp decline to reflect HSBC's house view on China's cost of equity (COE); and (2) a 100bp
increase in China banks' industry-specific COE in view of the reduced certainty about the
macro outlook and the regulatory environment.
HSBC revised its target prices and ratings for the China banks it covers as follows:
Name Rating Target Price
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ICBC (01398) Buy HK$7.80 from HK$8.90
CCB (00939) Buy HK$9.50 from HK$10.8
BOC (03988) Buy HK$4.70 from HK$5.50
ABC (01288) Buy HK$4.80 from HK$5.80
PSBC (01658) Hold HK$4.90 from HK$5.30
BoCom (03328) Buy HK$7.10 from HK$8.00
CMB (03968) Buy HK$38.70 from HK$43
CITIC Bank (00998) Buy from Hold HK$5.90 from HK$6.30
Minsheng Bank (01988) Hold HK$6.20 from HK$6.92
CEB (06818) Buy HK$4.30 from HK$4.80
CQRC Bank (03618) Hold HK$5.40 from HK$6.00
Huishang (03698) Hold HK$3.30 from HK$3.95