UBS: BANKCOMM (03328) Strong Pre-Provision Operating Profit Growth Supports Third-Quarter Earnings, Performance Close to the Top of Its Peer Group

UBS issued a research report stating that BANKCOMM (03328) strong pre-provision operating profit growth supported third-quarter earnings, with performance close to the top of its peer group. The "Buy" rating and target price of HK$10.25 are maintained. BANKCOMM's third-quarter net profit growth accelerated to 10.1% year-on-year, above the average of 8.6% for the six major banks. Results were supported by stronger core revenue and strict cost control. The bank noted that third-quarter net interest income rose 10.8% year-on-year, 1 percentage point faster than the peer average; net fee income fell 6% year-on-year, a smaller decline than the peer average of 7.5%; other non-interest income rose 18.1% year-on-year, mainly driven by a 60.1% increase in net trading gains, including gains related to ChangXin Memory Technologies. Operating expenses fell 3.7% year-on-year, but impairment provisions rose 22.7% year-on-year, partly offsetting the strong pre-provision profit growth. The bank estimates credit costs rose 8 basis points year-on-year to 55 basis points, the highest among the six major banks and still the main constraint on future earnings growth. The bank estimates third-quarter net interest margin improved 1 basis point quarter-on-quarter and 7 basis points year-on-year to 1.25%; the reported net interest margin for the first nine months was 1.24%, up 4 basis points year-on-year, but still the lowest among the six major banks. The non-performing loan ratio fell 1 basis point quarter-on-quarter to 1.29%; the provision coverage ratio declined from 210% in the third quarter of 2025 to 200.1% in the third quarter of 2026; the core tier-1 capital adequacy ratio rose 10 basis points quarter-on-quarter to 11.35%, still below the six major banks' average of 12%. The bank expects a slightly positive market reaction to the results.