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00939 CCB
RTNominal up6.570 +0.110 (+1.703%)
Research Report

12/01/2021 15:40

{I-bank focus}China banks' earnings growth seen to improve

[ET Net News Agency, 12 January 2021] BofA Global Research said 2020 was a good year
for the global equity markets, but China banks underperformed, as banks were called to
sacrifice profit and support the real economy.
As economic growth recovers and monetary policy tightens in 2021, the research house
expects banks' earnings growth to improve, and valuation to normalize to 0.7-0.8x P/B,
which should offer significant absolute upside from the current levels (0.61x P/B).
With nominal GDP growth at 3% and total credit growth at 13.7% by 3Q 2020, China's
credit/GDP growth multiplier jumped to 4.6x, higher than the previous peak at 3.6x in 4Q
2009. The very high credit multiplier is likely to drive a strong GDP growth recovery in
4Q 2020-2021.
BofA said net profit growth of the sector troughed at -10% in 1H 2020 and recovered to
-8.5% by 9-month 2020. The research house expects the decline to further narrow to
mid/low-single-digit in FY2020, and rebound to positive mid/high-single-digit growth in
FY2021. It revised its target prices for the banks it covers as follows:
Name Rating Target Price (change)
-------------------------------------------------------------
ABC (01288) Buy HK$4 (+13%)
BOC (03988) Buy HK$3.7 (+9%)
BankComm (03328) Underperform HK$5.15 (+1%)
CCB (00939) Buy HK$7.7 (+12%)
ICBC (01398) Buy HK$6.3 (+15%)
PSBC (01658) Buy from Underperform HK$5.3 (+23%)
CEB (06818) Buy HK$3.68 (+2%)
CMB (03968) Underperform HK$30 (+24%)
CNCB (00998) Underperform HK$4.15 (+1%)
MSB (01988) Buy HK$6.7 (+6%)
CQRB (03618) Buy from Underperform HK$4.7 (+19%)

Remark: Real time quote last updated: 13/04/2021 17:59
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