[ET Net News Agency, 23 July 2019] Huatai Research lowered its target price for
Agricultural Bank of China (ABC)(01288) to HK$4.18 from HK$4.66 due to higher credit
costs, lower forex forecast and higher beta. The research house maintained its "buy"
rating.
It cited ABC on a conference call earlier this month saying that (1) NIM contraction can
be worse than peers in 1H due to rising deposit cost and a more negative impact from
interbank rates decline, but funding cost pressure is likely to ease in September, (2)
corporate loan demand remains weak with limited qualified borrowers, but personal loan
demand is stable, and (3) asset quality is likely to improve in 2019, but Huatai expects
higher NPL formation in 2020-2021.
Huatai raised its 2020-2021 NPL formation forecast amid economic downturn, given ABC's
greater exposure to county areas and the MSE business. (KL)