Xiaomo: Raise the Bank of China (03988) target price to HK$7 to maintain the “gain” rating

The Zhitong Finance App learned that J.P. Morgan Chase released a research report stating that it has updated its financial model for the Bank of China (03988), and that the profit forecast for 2026 to 2028 remains largely unchanged, with only minor adjustments of 0.0%, -0.1% and -0.1%, respectively; the bank raised the Bank of China's target price from HK$6.7 to HK$7.0 as of December 2027, mainly due to a slight increase in the long-term average return on equity (ROE) assumption, which rose from 9.3% to 9.4%, maintaining the “gain” rating.

The report analyzed that the Bank of China has manageable risks in dealing with the impact of tariffs. Although the bank's exposure to export-related loans may be higher than other banks, J.P. Morgan believes that Chinese exporters are better prepared for tariffs than companies in other regions. According to sensitivity analysis, if the bad debt ratio of US export-related loans rises to 20%, the impact on the Bank of China's profits will be about 5%. If other conditions remain unchanged, the downside risk is manageable.

Furthermore, the report points out that rising market expectations for the Federal Reserve's interest rate hike will give a positive boost to the Bank of China's overseas profits.