UBS: Bullish on the rapid profit growth of local banks, CQRC BANK (03618) rated as "buy"

UBS released a research report stating that it currently prefers stocks in the Bank Of China sector that have fast profit growth and high return on equity. Although overall loan growth in mainland China is slowing down, local banks in regions such as Sichuan, Jiangsu, Zhejiang, and Chongqing are still able to achieve high single to double-digit percentage loan growth. The report also sees potential in smaller local banks that have room to increase market share through industry consolidation. The bank expects that leading local banks will see double-digit growth in net interest income under the push of fewer interest rate cuts on loan market quotations and repricing of deposits by 2025. This will support rapid growth in net profits of high single to double digits by 2026. Currently, their top picks are Bank Of Hangzhou (600926.SH) and Bank Of Jiangsu (600919.SH), and they have a "buy" rating on CQRC BANK (03618), with a target price reduced from 8.35 Hong Kong dollars to 7.8 Hong Kong dollars. UBS maintains a "neutral" rating on HUISHANG BANK (03698), with an increased target price from 5.4 Hong Kong dollars to 5.9 Hong Kong dollars.