On Thursday, BofA Securities adjusted its stance on Bank Of Communications Co Ltd. (3328:HK) (OTC: BKFCF) stock, moving its rating from Buy to Neutral. The firm set a new price target of HK$6.08, a slight increase from the previous HK$5.90. The revision follows the bank's reported net profit decrease of 0.7% year-over-year to RMB66.7 billion for the first nine months of 2024, which underperformed when compared to its state bank counterparts.
The bank's core earnings saw a decline of 5.6% year-over-year, a downturn from the 5.9% increase observed in the first half of 2024. The return on equity (ROE) for the same period also experienced a dip, falling by 0.7 percentage points to 8.9%. Additionally, there was a marginal decrease in the Common Equity Tier 1 (CET1) ratio, which edged down by 1 basis point quarter-over-quarter to 10.29%.
In light of these financial results, BofA Securities has revised its earnings estimates for Bank Of Communications for the years 2024 through 2026, raising them by 1-3%. Correspondingly, the price objectives have also been adjusted upward by approximately 3-4% to HK$8.93, HK$8.83, and HK$8.85, up from the prior targets of HK$8.90, HK$8.60, and HK$8.65 respectively.
The downgrade to Neutral from Buy was influenced by the bank's recent 10% appreciation in share price. BofA Securities expressed a preference for Postal Savings Bank of China (PSBC-H) over Bank Of Communications (BoCom-H) due to the former's superior earnings growth prospects. The firm reiterated its Neutral rating on BoCom-A, the bank's A-shares.
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