Bank of China disclosed its 3Q26 results on 30 October. In 3Q26, attributable NP, operating income and PPOP increased by 6.4%, 4.5% and 15.8% YoY, respectively. In 9M26, attributable NP, operating income and PPOP rose by 5.5%, 7.2% and 11.7% YoY, respectively, with growth rates changing by +0.4pp, -1.3pp and +1.9pp from 1H26, reflecting steady operating performance. Annualized ROE and ROA in 9M26 were 8.70% and 0.67%, respectively, down 0.3pp YoY and broadly flat YoY. Key highlights from the results were stable credit expansion, sustained rapid growth in net interest income, marginal stabilization of NIM, continued gains in liability cost reduction and cost control, and broadly stable asset quality. The bank's globalized and comprehensive operations continued to deepen. Maintain OVERWEIGHT on both. Bank of China-H (3988 HK) is on our Huatai Conviction BUY list.
Liability cost optimized
At end-3Q26, total assets, loans and deposits increased by 9.5%, 7.1% and 5.4% YoY, respectively, with growth rates changing by +0.2pp, -0.2pp and +0.8pp from end-2Q, indicating broadly stable balance sheet expansion. In 9M26, the group's new loans totaled RMB1,562.6bn, of which corporate loans increased by RMB1,600.8bn and personal loans decreased by RMB38.2bn, reflecting continued tilt toward corporate lending. In 3Q26 alone, loans increased by RMB274.8bn, with corporate loans up RMB308.8bn and personal loans down RMB34.0bn. The bank strengthened credit resource supply, with domestic manufacturing loans and strategic emerging industry loans increasing by 16.4% and 17.3% from end-2025, respectively. Net interest income rose by 10.4% YoY in 9M26, accelerating by 0.2pp from 1H26, with interest income down 0.3% YoY and interest expense down 8.5% YoY. NIM was 1.27% in 9M26, showing marginal stabilization, with liability cost reduction making a notable contribution to NIM.
Maintain 2027E A/H target PB at 0.83x/0.72x
We forecast attributable NP of RMB256.5/271.5/287.6bn for 2026-2028, representing changes of -0.1%/+0.4%/+0.7% from our previous estimates. Our 2027E BVPS forecast is RMB9.53, implying 0.74x/0.55x 2027E PB for the A/H shares. Based on Wind consensus, comparable A- and H-share banks trade at average 2027E PB multiples of 0.71x and 0.56x, respectively (previous: 2026E 0.66x and 0.54x). We believe the Bank's distinctive strengths in globalized and comprehensive operations warrant a premium. We assign 2027E target PB multiples of 0.83x/0.72x for the A/H shares (previous: 2026E 0.80x/0.70x), with target prices of RMB7.91/HKD8.09 (based on an RMB/HKD exchange rate of 1.1793; previous: RMB7.14/HKD7.29). Maintain OVERWEIGHT on both. Bank of China-H (3988 HK) is on our Huatai Conviction BUY list.
Risks: slower-than-we-expected asset quality recovery, weaker-than-we-expected earnings recovery.