Citigroup said on Wednesday it had raised its investment rating on Bank of
Communications to "hold" from "sell," after Chna's fifth-largest lender posted a
31 percent gain in first-half profit.
Citigroup raised its price target to HK$5.60 per share from HK$4.60 per
share, saying the market would focus on the bank's strong operating results.
The bank's shares had fallen nearly 2 percent to HK$5.03 in early trading on
Wednesday.
Bank of Communications, which is 19.9-percent owned by HSBC Holdings Plc.,
said it earned 6.0 billion yuan (US$758 million) in the first half, up 31
percent from a year earlier, driven by loan growth of 16.8 percent.
The strong results also prompted Citigroup and Merrill Lynch to raise their
earnings estimates for Bank of Communications.
Citigroup increased its 2006 profit forecast by 5.3 percent to 12.7 billion
yuan and its 2007 estimate by 8.8 percent to 15.9 billion yuan. It expects the
bank to earn 20.7 billion yuan in 2008, up 7.4 percent from its previous
estimate.
Merrill, which maintained its "sell" rating because of the bank's high stock
price, raised its 2006 profit estimate by 4 precent and its 2007 and 2008
forecasts by 9 precent and 17 percent, respectively, citing high loan growth.
Merrill now expected Bank of Communications to earn 12.4 billion yuan this
year, 14.6 billion yuan in 2007 and 16.2 billion yuan in 2008.
Bank of Communications shares have more than doubled since their Hong Kong
debut in June 2005.
Merrill said the stock was expensive, citing recent credit tightening
measures by Beijing and competition for investor interests from several new
China bank listings.
Bank of China shares began trading in Hong Kong in June and Industrial &
Commercial Bank of China, the country's biggest lender, and a group of other
mainland banks plan listings in the next few months.
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