Prefer Mainland Banks to HK Banks

HK banks' underperformance "set to continue", says ABN Amro; bank shares covered by ABN on average down 4.5% YTD, vs HSI's 4.5% rise YTD, and underperformance may continue due to lack of positive earnings surprises, as cost/income ratios rise, NIMs flat to lower and sluggish mortgage growth continues to weigh on loan growth. Stays Underweight on HK banks, recommends taking profits on Bank of East Asia (0023.HK), believes operating cost pressures in China, narrower Prime-Hibor spread will lead to earnings downgrades, further PBOC rate hikes could threaten China NIM. Overall, prefers Chinese banks to HK banks, "given the lower risk of earnings disappointment and their strong growth".