UBS upgrades CMBC rating to "Buy," optimistic about profit inflection point and valuation reassessment

UBS published a research report, upgrading the rating of China Minsheng Bank (01988.HK) from "Neutral" to "Buy," based on its valuation being at a deep discount, with a forecasted price-to-book ratio of only 0.22 times in 2026 (compared to 0.47 times for China CITIC Bank (00998.HK)); and benefiting from revenue improvement and the large-scale release of balance sheet risks, profitability is likely to see a turning point starting in 2026.

The bank believes that the market currently views Minsheng Bank through the pricing logic of ongoing profit pressure, while UBS analysis suggests that its provisioning risk may have peaked. As profitability is expected to reach a balance in 2026 and turn to positive growth starting in 2027, the bank believes that its valuation re-rating potential will exceed the recent weakness in equity returns. UBS has slightly raised its earnings per share forecast for Minsheng Bank for 2026 to 2029 by 5-6%, but at the same time, due to short-term market volatility, has slightly increased the cost of equity (CoE) to 11.5%, with the target price slightly adjusted down from HKD 5.43 to HKD 5.3