Nomura published a research report that raised China Construction Bank's (0939.HK) target price from HK$7.64 to HK$7.68, reaffirmed the purchase rating, and raised the bank's profit forecasts for last year and this year by 6% and 2%, respectively, to reflect the normalization of non-performing loan provisions and positive asset quality prospects. The bank also lowered CCB's profit forecast for next year by 0.9%. Currently, CCB's profit for last year, this year, and next year is expected to fall 3.2%, increase 9.3%, and increase 11.5% year-on-year, which means there will be a “V-shaped” rebound in profit for the fourth quarter of last year.

Nomura said that since strong economic recovery is expected to improve the bank's asset quality, CCB's credit costs last year were lowered by 10 basis points to 1.16%. As the business environment improves, including stable interest rates on bank loans, the mainland economy continues to recover, and stimulus and easing policies may be reduced. The bank estimates that CCB's net interest spread was 2.11% last year, 2.07% this year, and 2.07% next year.

The bank also expects that CCB's total loan amount from 2020 to 2022 will increase by 12%, 11%, and 10.5%, respectively. Furthermore, in order to reflect less pressure on state-owned enterprise banks to transfer profits and increase profitability, asset quality is expected to recover. The return on equity from 2020 to 2022 is expected to be 11.5%, 11.3%, and 11.3%, respectively.