Damo: Raising target prices for 8 domestic bank stocks and lowering 2 expected deleveraging to support a moderate recovery in banks' profits and valuation restoration

The Zhitong Finance App learned that Morgan Stanley released a research report saying that despite renewed market concerns about the macroeconomic slowdown, the bank expects a firm and steady deleveraging process within the next 12 to 18 months, supporting the continued moderate recovery in profit growth of major banks and further restoration of valuations. In view of the early recovery in net interest spread (NIM), moderate balance sheet growth, steady increase in handling fee revenue, and expected reduction in credit costs in the next few years, the bank raised the target price of only 8 bank stocks in Hong Kong and lowered the target price of 2 other domestic bank stocks.

Morgan Stanley pointed out that although balance sheet expansion has slowed, deleveraging measures have reduced medium- to long-term risk and helped credit costs gradually decline over time. Furthermore, deleveraging has promoted the construction of a more sustainable financial system and supports a gradual recovery in loan yields and bank return on equity (ROE). These two indicators are currently below the level that support long-term sustainable development. This can be seen in the context of the macroeconomic slowdown, where the loan market quoted interest rate (LPR) and lower limit of loan yield remain stable. These factors help stabilize the net interest spread in the Chinese banking industry. The bank is confident that the yield on loans and financial assets will gradually recover. Combined with the gradual decline in credit costs, it will support a moderate recovery in the profit growth of major banks.

Morgan Stanley raised the target price of 8 banks in Hong Kong, namely: Agricultural Bank (01288) target price increased by 14.9% to HK$8.5; CCB (00939) target price increased 15% to HK$13; Bank of China (03988) target price increased by 14.9% to HK$7.7; Postbank (01658) target price increased by 7.9% to HK$6.8; China Merchants Bank (03968) target price increased by 1.8% to HK$61.5; China CITIC Bank (00998) target price Tune 11.7% to HK$11.5; Bank of Communications (03328) increased its target price by 10.8% to HK$7.2; Chongqing Rural Commercial Bank (03618) increased its target price by 7.8% to HK$5.5.

At the same time, the bank lowered the target prices of only 2 banks in Hong Kong, namely: Minsheng Bank (01988) reduced its target price by 11.3% to HK$4.7; Everbright Bank (06818) lowered its target price by 11.1% to HK$5.5.