According to a report published by HSBC Global Research, both East China and Hong Kong businesses face bleak operating prospects
Even though the stock price has clearly underperformed the Hang Seng Index since the beginning of the year, the valuation is lower than the historical average, but it is still not attractive. East Asia target price 36.51% to 18.6 yuan.
The Bank of East Asia has been mad at brokerages in recent months. The picture shows Executive Chairman Li Guobao
Capital cost pressure is greater than peers
According to HSBC Global Research, the Mainland’s operating environment is full of challenges. As of the first half of this year, the number of mainland outlets in East Asia has dropped 23% from a high level, and the number of employees has dropped from a peak of nearly 40% to about 3,800, and the profitability of the mainland business. The ability has always been lower than the group average. Based on the impairment of the risk exposure of commercial real estate in East Asia in the first half of this year, it is necessary to continue to “de-risk” credit, and to decompress the credit situation, it is impossible to determine the advantages of East Asia.
Although East Asia is a local bank, HSBC Global Research is not optimistic about its Hong Kong business. It means that the deposit sources in East Asia depend on time deposits more than demand deposits. As the loan-to-deposit ratio of the banking industry rises, the deposit competition is fierce, and the pressure on capital costs in East Asia is greater than that of its peers. .
Cut the profit forecast for this year by more than 50%
On the loan side, with the reduction of cross-border transactions in Hong Kong and the facing macro uncertainty, the demand for market loans will slow down. It is expected that East Asia will moderately reduce its risk appetite in Hong Kong. The bank’s loan growth and loan yield will continue to be affected. Pressure.
HSBC Global Research lowered its earnings forecasts for East Asia this year and next year by 54.9% and 22.4%, respectively, due to the expected narrower net interest margin recordings, lower fee income, and conservative estimates of East Asian asset quality. East Asia’s share price closed at 18.5 yuan yesterday, down 2.84%.
In fact, the Bank of East Asia has been mad at brokerages in recent months. JPMorgan Chase last month pointed out that the Bank of East Asia’s net interest margin in the second half of the year was inevitable compared with the first half of the year. The uncertainty of the quality of its business assets in China is lingering, although Valuation has fallen to a historical low, but it is difficult to reverse the situation in the short term. The target price of East Asia in December will be reduced from 20.6 yuan to 17.2 yuan, a drop of 16.5%, maintaining the “underweight” investment rating.