"Big Banks" Bank of America Securities lowers Bank of China's target price to 5 yuan, last year's net profit slightly below expectations

Bank of America Securities published a research report indicating that Bank of China (03988.HK)(601988.SH) had a net profit of RMB 243 billion before deducting preferred stock dividends last year, representing a year-on-year growth of 2.2%, which is 0.7% lower than the bank's expectations. Core earnings grew by 1.6% year-on-year, exceeding forecasts by 1.9%. The return on equity (ROE) decreased by 0.6 percentage points year-on-year to 9%. The common equity tier 1 (CET1) ratio increased by 33 basis points year-on-year to 12.53%. The annual dividend per share was RMB 0.226, with dividend yields for H shares and A shares at 5.2% and 4%, respectively.

The bank adjusted its earnings forecasts for 2026 and 2027 by 1%, lowering the target price for Bank of China H shares by 4% to HKD 5, and the target price for Bank of China A shares by 8% to RMB 5.6, reflecting earnings adjustments and extending the average return on equity forecast to 2026-2028, maintaining a "Neutral" rating. The bank prefers the higher quality earnings of Industrial and Commercial Bank of China (01398.HK) and China Construction Bank (00939.HK)