Citigroup and JP Morgan both maintained “BUY” call on CCB and raised its target price by 13% to HKD6.80. Hong Kong-listed China Construction Bank (CCB) is expected to post a first half to June net profit of 35.65 billion yuan, up 54 % from a year earlier, driven by a strong net-interest margin (NIM) and solid growth in customer loans, according to JP Morgan.
CCB's loans may have grown by nearly 10 % in the first half to June from the preceding six months and its non-performing loans declined to 3.01 % in the period.
Net profit forecast is raised from 2007-2009 by 2-14 % on higher net interest margin (NIM) of 2.85-2.92 % as a result of rising bond yields, up 50-100 basis points since March.
Citigroup estimated that for every increase in investment yields of 100 basis points for its short-term yuan-denominated bonds of 736 billion yuan, CCB's net interest and profit before tax will be raised by 11bps and 7 % for 2008.
Meanwhile, JP Morgan expects CCB's earnings per share (EPS) to grow more than 20 % in 2008 and 2009 partly through lower credit costs. It has forecast 2008 EPS at 0.37 yuan and 2009 at 0.45 yuan.
However, the stock is vulnerable to a correction in the near term as CCB's share price has risen by 29 % since it announced its planned A-share listing last month.
Nevertheless, a correction in the share price is a buying opportunity as strong earnings growth will continue to drive its share performance.
CCB closed at HKD5.85, down 4 cents.
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