Bank of China: Stable Financial Performance and Growth Potential Drive Buy Rating

Analyst Michael Chang of CGS-CIMB reiterated a Buy rating on Bank of China (BACHF – Research Report), with a price target of HK$5.60.

Michael Chang’s rating is based on a combination of factors that highlight the Bank of China’s stable financial performance and potential for future growth. The bank’s net profit growth for FY24 exceeded expectations, with a notable year-on-year increase in the fourth quarter, marking the seventh time in eight years that it has achieved low-single-digit net profit growth. This consistent performance is expected to continue over the next few years, supported by a stable dividend payout ratio.
Another positive factor is the rebound in adjusted pre-provisioning operating profit (PPOP) in the fourth quarter of FY24, driven by stabilizing net interest income and a narrowing net interest margin decline. Additionally, the bank’s strong provisioning coverage ratio and conservative non-performing loan recognition provide a buffer against future net interest margin pressures. These elements, combined with reduced concerns over policy risks, have led to an increased target price and reaffirmation of the Buy rating, with potential catalysts including improving loan demand and economic recovery.