Bank of America Securities: Upgrading the target price of Postbank Savings Bank (01658) to HK$5.29 in the third quarter, profit growth lags behind peers

The Zhitong Finance App learned that Bank of America Securities released a research report stating that the net profit for the first nine months of Postbank (01658, 601658.SH) increased 4.6% year-on-year to RMB 80.1 billion, the lowest increase among state-owned banks; the bank raised the target price of H shares by 13% from HK$4.68 to HK$5.29, reaffirming the “outperforming market” rating of H shares. The target price for A-shares was raised 12% from RMB 5.22 to RMB 5.85, maintaining “neutrality.”

According to the bank, the year-on-year growth rate of the Postbank's core profit slowed from 17.3% in the first half of the year to 15.8% in the first nine months, as operating profit before provision for the third quarter fell 29% quarterly. The return on equity for the first nine months fell 0.4 percentage points year on year to 9.8%; the Tier 1 capital adequacy ratio for common stocks rose 17 basis points quarterly to 10.21%.

According to the bank, net interest spreads fell 5 basis points quarterly to 1.55%, and net interest income fell 0.3% quarterly. The non-performing loan ratio fell by 2 basis points quarterly, but the cumulative increase from year to date was 4 basis points to 0.99%. Special mention was made of the sharp increase in loans of 10% quarterly or 29% year-to-date, and the quarterly increase in the loan ratio by 15 basis points to 1.88%. The non-performing loan coverage rate fell another 10 percentage points quarterly, down 23 percentage points to 205% from the beginning of the year, and the loan provision rate fell 15 basis points quarterly to only 2.01%.

The bank generally kept its profit forecast unchanged, updated its 12-month forecast of RMB to 6.5 against the US dollar, and lowered the share capital cost by 100 basis points due to falling Chinese bond yields, resulting in the above target price adjustment; the bank reiterated the rating due to poor coverage and weak growth.