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UBS upgrades BankComm (03328) to HK$6.3
UBS Global Research lifted its target price for
Bank of Communication's (BankComm)(03328) to HK$6.3 from HK$5, and upgraded its rating to
"neutral" from "sell".
  The research house said BankComm has underperformed the sector by 23.2% on the basis of
52-week total return. Trading at 0.55x 2018 P/BV, a discount to the sector average at
0.76x, UBS believes the current valuation has reflected its weaker fundamentals. Asset 
quality and NIM showed signs of stabilising in 2017, which is likely to relieve concerns 
on its earnings growth headwinds.
  UBS said BankComm's NPL ratio has remained relatively stable over the past few quarters,
along with improved NPL formation. It also noted improving early indicators of asset 
quality in 2017, including a decreasing balance and ratio of both special mention loans
and overdue loans. However, credit cost is likely to stay at the current level of about
0.7% in 2018, as its NPL coverage ratio of 151.1% by end-3Q 2017 was only marginally above
the required minimum.

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