Goldman Sachs: Maintaining ICBC's (01398) “Neutral” Rating Target Price of HK$8.02
The Zhitong Finance App learned that Goldman Sachs released a research report summarizing the six key observations of ICBC (01398). It is expected that ICBC's net interest spreads will continue to be stable, new loan pricing shows signs of stabilization, and maintain its “neutral” rating for Hong Kong stocks. The target price is HK$8.02.
In terms of net interest spreads, ICBC's net spread for the first three quarters of this year rose slightly by 1 basis point from the beginning of the year, mainly due to lower deposit costs and the strengthening of the USD/EUR exchange rate, which supported overseas profit margins. Management expects net spreads for the fourth quarter of 2026 to face pressure of about 1 basis point, mainly due to the gradual repricing of bond assets. Looking ahead to 2027, net spreads are expected to fall by less than 5 basis points for the whole year.
In terms of loan business, the average yield of new RMB loans in the first three quarters of this year was 2.63%, down 12 basis points from the previous year, but the decline has narrowed by 4 basis points. Management pointed out that the yield on new loans after tax was roughly the same as the existing loan portfolio. Among them, the pricing of mortgages and other retail loans was relatively stable, while corporate loans and inclusive finance loans declined moderately. By the end of September, domestic RMB loans had increased 5.6% year on year, and management expected an increase of about 6% for the whole year; the loan growth rate in 2027 will be slightly lower than 2026, but still higher than the overall banking system average.
In terms of asset quality, ICBC's non-performing loan balances have been declining for several consecutive quarters. Non-performing mortgages are mainly concentrated on early-stage loans, while the migration rate and default rate of personal loans have improved, and bad credit card balances, non-performing loan rates, and overdue dates have also declined at the same time. Most operating loans are backed by collateral, and the risk is concentrated in Guangdong, developed coastal regions, and major cities. In terms of local government financing platforms (LGFV), liquidity has improved since receiving financial support in 2023. ICBC remains cautious about lower-level LGFVs and state-owned enterprises, and new loans were limited in the first three quarters of this year.
In the real estate business, mortgage balances for new buildings continued to decline, and second-hand property loans accounted for more than 50% of new mortgages. The early repayment situation in the first three quarters of this year decreased by 4.6% year-on-year, and the early repayment ratio was nearly 9 percentage points lower than in 2024. Management believes that recent policy support will gradually benefit second-hand property transactions, but property prices in low-tier cities have yet to stabilize, making it difficult for mortgage demand to rebound sharply in the short term.
In terms of non-interest income and international business, financial investment accounts for about one-third of total assets, mainly bonds. Tax incentives on local government bonds also help increase after-tax returns. The asset size of ICBC Wealth Management clients reached RMB 2.61 trillion, a cumulative increase of 2.08 trillion yuan or 8.7% this year. Management is gradually shifting from product sales to account management, investment research, asset allocation and long-term services.
International financing needs remain concentrated in export-related industries, including new energy, machinery, electronics, and high-end manufacturing, while new business is expanding from traditional US/European markets to ASEAN, the Middle East, and Latin America. By the end of September, ICBC's foreign currency deposits (excluding financial institutions) had reached more than 120 billion US dollars, a cumulative increase of more than 20 billion US dollars this year, mainly from corporate customers.