According to a research report released by UBS, the bank maintains a Neutral rating and a target price of HK$7.3 on the H-shares of Agricultural Bank Of China Limited (ASX: 01288). The company's third-quarter growth in both revenue and net profit continues to outperform its state-owned peers, mainly driven by solid net interest income and strong investment gains. The bank anticipates a positive market reaction.
Agricultural Bank of China's net profit for the first nine months reached RMB 236.5 billion, representing a year-on-year increase of 7.1%. UBS estimates that third-quarter net profit came in at RMB 90.2 billion, up 10.8% year-on-year, a notable acceleration from the 4.9% growth recorded in the first half and broadly in line with state-owned peers such as China Construction Bank and Industrial and Commercial Bank of China.
The report notes that Agricultural Bank of China's third-quarter revenue grew 15.1% year-on-year, higher than the 11.2% growth in the first half, primarily supported by a 10.7% year-on-year increase in net interest income and an 83.3% surge in other non-interest income, although the decline in net fee income widened to 15.2%.
On net interest margin, UBS estimates that the third-quarter net interest margin stood at 1.28%, down 1 basis point quarter-on-quarter and up 2 basis points year-on-year, remaining broadly stable overall. Management expects the full-year net interest margin to remain roughly stable. Loans grew 7.9% year-on-year, asset quality remained broadly stable, and the non-performing loan ratio fell 2 basis points quarter-on-quarter to 1.23%.
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