China Everbright Bank’s Shares Plunged – Annual Profit?

China Everbright Bank’s shares plunged today after the annual profit fell short of expectations, triggering concerns among investors about the lender’s performance. The decline in shares marked the bank’s most substantial one-day percentage drop since its listing in Hong Kong in 2013.

At the midday break on Thursday, shares of the Chinese commercial lender were down by 11% to 2.30 Hong Kong dollars (US$0.29), pushing the stock into negative territory for the year. The drop came following the announcement of the bank’s 2023 financial results, which showed a significant decline in net profit.

Disappointing Financial Results Send China Everbright Bank’s Shares Plunged

According to the report released late Wednesday, China Everbright Bank’s net profit for 2023 decreased by 9.0% to 40.79 billion yuan (US$5.64 billion), well below the consensus estimate of CNY45.40 billion by analysts polled by FactSet. The disappointing performance was attributed to weaker net interest income and a surge in fourth-quarter provisions, which impacted the bank’s bottom line.

Net interest income experienced a decline of 5.4% to CNY107.48 billion, missing expectations, while net fee and commission income also dropped by 11%. In the fourth quarter, the bank’s profit fell sharply to CNY3.10 billion from CNY13.62 billion in the previous quarter, primarily due to increased provisions aimed at tightening nonperforming loan standards.

Analysts from Citi Research expressed concerns about the lack of a significant dividend payout percentage hike and highlighted uncertainties in the asset quality outlook. Despite these challenges, they maintained a buy rating on the stock with a target price of HK$3.02, citing resilient loan growth and decent trading gains.

“We think the worst for CEB is over as capital constraints have eased, while stronger-than-peers’ deposit growth has been a positive surprise,” the analysts noted in a research report.

News Overview

The disappointing financial results and the subsequent drop in share prices underscore the challenges facing China Everbright Bank amid evolving market conditions and regulatory changes in the banking sector. Investors are closely monitoring the bank’s strategies to navigate these challenges and restore investor confidence in its long-term growth prospects.

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