DBS Group Research re-initiated coverage on Bank of East Asia (BEA)(00023) with a "fully valued" rating and a target price of HK$18.
The research house said BEA was a first mover in China and has the largest China exposure among HK banks (30% of total loan book). In 2014, the bank was hit by the corporate loan credit downcycle in China, and this led it to de-risk and shift its focus to retail loans which accounted for 30% of its China loan book in 1H 2019, versus 17% in
2017.
However, with increasing multiple lending risks and strict property controls in China, DBS remains cautious about BEA's asset quality given its high exposure to consumer finance and property, which form 31%/23% of its China loan book.
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