In a report released today, Manyi Lu from DBS reiterated a Buy rating on Bank of Communications Co (BKFCF – Research Report), with a price target of HK$8.00.
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Manyi Lu has given his Buy rating due to a combination of factors that highlight the Bank of Communications Co’s potential for growth and stability. One of the key reasons is the bank’s strategic focus on personal loan growth, which has outperformed the market and increased significantly in FY24. This shift towards personal loans, which typically offer higher yields and lower funding costs, is expected to support the bank’s earnings despite some pressure on net interest margins.
Additionally, the bank remains an attractive dividend play, offering a near 5% dividend yield even after accounting for share dilution from the Ministry of Finance’s capital injection. This yield is appealing to long-term investors, particularly insurance companies in China. Despite the revised earnings forecasts due to lower-than-expected net interest margin performance, the bank’s valuation remains competitive compared to its peers, reinforcing the Buy recommendation with a target price of HKD 8.