03988

Morgan Stanley's analyst rating for BANK OF CHINA was revised to "Overweight" due to a combination of factors. The firm lowered its net interest margin forecasts for 2025-2027, reflecting a slower recovery pace for state-owned banks' net interest margins. However, it raised its fee income forecasts based on higher-than-expected fee income growth in 3Q25. As a result, Morgan Stanley increased its net profit forecasts for BANK OF CHINA for the years 2025, 2026, and 2027 by 0.9%, 1.4%, and 1.1% respectively, and raised the target price from $5.9 to $6.3.

The analyst rating for BANK OF CHINA (03988.HK) was influenced by several factors highlighted in the article. The key reasons for the Buy rating and the target price increase include: 1. Year-over-Year Profit Growth: The bank logged a 1.1% increase in net profit attributable to the parent, indicating a positive trend in profitability. 2. Revenue Increase: There was a 2.7% rise in revenue, which, despite being slightly lower than previous growth rates, still reflects a solid performance. 3. Stability in Credit Growth and NIM: Credit growth remained strong, and the net interest margin (NIM) stabilized, suggesting a resilient banking operation. 4. Narrowing Decline in Net Interest Income (NII): Although there was a decline in NII, the rate of decline has narrowed, which is a positive sign for the bank's financial health. 5. Improvement in Effective Tax Rate: The marginal improvement in profit growth was attributed to a better effective tax rate, which positively impacted overall profitability. 6. Analyst Adjustments: The target price for both H shares and A shares was raised, reflecting confidence in the bank's performance and future prospects. These factors collectively contributed to the positive analyst rating and the upward revision of the target price.

The analyst rating for Bank of China was reiterated at Neutral due to the following reasons: 1. Unattractive Dividend Yield: The broker noted that the dividend yield is not appealing, which can deter investors looking for income from their investments. 2. Potential Pressure on Net Interest Margin: There are concerns about possible pressure on the bank's net interest margin resulting from anticipated Federal Reserve rate cuts, which could impact profitability. Despite raising earnings forecasts and target prices, these factors led to a cautious outlook, resulting in the Neutral rating.