Analysts are sharply marking up profit estimates and price targets for BOC Hong Kong (Holdings) this year and next after the bank on Friday removed the apparent uncertainty over its credit portfolio, highlighted by a problem loan made to arrested Shanghai tycoon Chau Ching-ngai.
More than 10 brokerages made a profit revision yesterday, with Morgan Stanley reporting the biggest upgrade - up 25 per cent over its previous forecast for next year to $9.26 billion. This year, it expects the bank to earn $7.39 billion, up from $6.67 billion a year earlier.
The bank's 12-month price targets have also been sharply revised. HSBC marked up 50 per cent to $12 while Lehman Brothers believed its shares would rise 30 per cent to $12.20.
On the back of these reports, the bank's shares soared higher yesterday, adding 1.99 per cent to finish at $10.25. About $296.31 million worth of shares were traded yesterday, ranking it among the 10 most active stocks. BOCHK - Hong Kong's No2 banking group - is the overseas flagship of China's biggest foreign-exchange bank.
Morgan Stanley said the findings of three thorough, independent audits of the bank's books in the first half, revealed on Friday, had shown there was 'no big blow-up from a credit perspective', but the lender still had to tighten credit policy and corporate governance.
The brokerage said the bank would become a 'recovery play' because of 'its gearing into property, the stock market and increased China-related activity'.