Daiwa: Initiates coverage on China Construction Bank Corporation (00939) with a "Buy" rating, target price HK$11.05

Daiwa released a research report initiating coverage on China Construction Bank Corporation (00939) with a "Buy" rating and a target price of HK$11.05, and listed the stock as its top pick among Chinese banks. The bank noted that CCB's return on equity for 2025 was 10.1%, the second highest among large state-owned banks, benefiting from funding cost advantages and fee income contribution. Its net interest margin has bottomed out ahead of peers, rebounding in the first quarter of 2026 and widening to 1.38% in the second quarter of 2026. Fee income accounted for 14.5% of 2025 revenue, the highest among state-owned banks. The bank believes the market's discount on CCB due to its possession of China's largest mortgage loan portfolio of approximately RMB 6 trillion, accounting for 22% of total loans, is excessive, as retail loans actually facing rising pressure account for only 11% of the loan portfolio. About half of corporate loans are directed toward policy-supported sectors such as infrastructure with relatively good repayment records. The non-performing loan ratio is 1.31%, the provision coverage ratio is 233%, and the capital adequacy ratio is 19.7%, with buffers sufficient to absorb remaining property and local government financing vehicle pressures while maintaining the existing dividend level.