The Zhitong Finance App learned that Bank of China stocks continued to rise in early trading. As of press release, China Merchants Bank (03968) rose 3.85% to HK$31; ICBC (01398) rose 3.77% to HK$4.13; Bank of Communications (03328) rose 3.39% to HK$5.18; CCB (00939) rose 3.13% to HK$4.95; Bank of China (03988) rose 2.61% to HK$3.15.

According to the news, the central bank recently announced that the 1-year LPR will remain unchanged at 3.45%, and the 5-year LPR will be lowered from 4.20% to 3.95%. CITIC Construction Investment pointed out that the “1 year no change+5-year reduction” policy package reflects the policy attitude of caring for bank interest spreads. The negative sentiment in the market has been greatly dispelled, favoring bank valuations and embracing the targets of high-performing banks. Since most mortgages were repriced in January, considering the hedging effect of lower deposit interest rates at the end of 2023, the current 5-year LPR cut of 25 bps had little impact on banks' net interest spreads for 24 years. It is expected that the narrowing of net interest spreads in the banking sector in 2024 will still be better than last year.

Motong Daikon said that since this year, Bank of China H shares have outperformed the Hang Seng Index by 10 percentage points, while BOC A shares have also outperformed the Shanghai and Shenzhen 300 Index by 11 percentage points. Although the unexpected reduction in LPR was bad for the Bank of China, it will not reverse its excellent performance since this year. Because the market is uncertain about macroeconomic growth, the dividend ratio is a key driver of BOC's performance, and the latest 5-year LPR cut should not affect the Bank of China's dividend last year, and the impact on this year's dividend is limited. Therefore, the bank reiterated the view that the Bank of China will continue to outperform the index in the first half of this year.