[ET Net News Agency, 14 October 2019] Nomura raised its target price for China
Merchants Bank (CMB)(03968) to HK$46.5 from HK$46.32 and maintained its "buy" rating.
The research house lifted its FY2019/20 earnings forecasts by 1% to factor in the better
1H numbers. It expects strong growth potentials and sustained high business quality,
thanks to CMB's retail-driven strategy.
For FY2019, Nomura expects CMB to deliver strong earnings growth of 13% (previously
11%), as the company already recorded earnings growth of 13.1% in 1H. Nomura thinks the
strong earnings growth for FY2019 will be mainly driven by strong loan growth of 11% and
NIM expansion to 2.7% from 2.57% for FY2018.
At the same time, asset quality remains solid, with NPL ratio at 1.23% in 1H (versus
1.36% in FY2018) and NPL coverage at 394% for 1H19 (versus 358% for FY2018).
In addition, Nomura thinks CMB may benefit more than its key peers from the recent
release of the Financial Rules for Financial Enterprises, as the company recorded NPL
coverage of 394% for 1H, well above the regulatory threshold of 300%. (KL)