On Tuesday, JPMorgan made a notable adjustment to its stance on Ping An Bank Co Ltd (000001:CH), upgrading the bank's stock from Neutral to Overweight. Accompanying this upgrade, the bank's price target has been raised to RMB15.00, up from the previous RMB11.30.
The upgrade by JPMorgan is rooted in several key observations. The firm noted that Ping An Bank should gain from strong capital markets, as evidenced by its fee income over average assets and its non-interest income contribution, which ranks second among banks, trailing only China Merchants Bank. Additionally, the bank's private banking assets under management are the second-largest among joint-stock banks.
Ping An Bank's lower exposure to mortgages compared to its peers is another factor contributing to the positive outlook. It has faced minimal impact from the repricing of the mortgage back book. Furthermore, retail loans, excluding mortgages, make up 44% of the bank's loan portfolio, the highest ratio among the banks covered by JPMorgan. This positions Ping An Bank to potentially benefit from an uptick in consumer spending and improvements in the asset quality of small and medium-sized enterprises (SMEs).
JPMorgan also highlighted the bank's performance during the 2021 bull market, where it traded at a premium of 70% above the price-to-book (PB) to return on equity (ROE) trend line. Currently, it trades at 12% below this trend, suggesting a potential for re-rating.
The firm's analysis indicates that Ping An Bank is well-positioned to capitalize on various market dynamics, which supports the rationale behind the upgraded rating and increased price target.
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