Goldman Sachs lowered forecast of large Chinese banks’ profit outlook, slightly cut target prices
STOCKS VIEWS & ANALYSIS
Goldman Sachs lowered forecast of large Chinese banks’ profit outlook, slightly cut target prices
STOCKS VIEWS & ANALYSIS

Goldman Sachs lowered forecast of large Chinese banks’ profit outlook, slightly cut target prices

 

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Similar to the 2013-15 cycle, Chinese banks will strive to maintain dividends at the beginning of the downturn and then give up dividend targets in favor of capital and risk buffers when dividends, capital and provisions are not well balanced, said Goldman Sachs in a note. The broker expected Chinese banks to act similarly in 2023-25.

The market generally viewed the valuation of large banks as low, but Goldman said that the impact of margin risk from local government debt and increased losses in credit portfolios may weaken earnings growth and may lead to further adjustments for mainland banks.

Goldman Sachs lowered its forecast for large Chinese banks’ profit before provisions by 5% and 6% for 2023 and 2024, and lowered the target prices by 1% on average, taking into account the risk of lower dividends.

Goldman believed PSBC ‘s industry-leading earnings outlook and stable dividend payout are undervalued, and upgraded its rating from Sell to Buy, with price target raised to HK$5.8 from HK$4.06.