Business

China’s 14 publicly traded banks, which almost doubled profit in the first half, had their price targets and earnings estimates slashed by Goldman Sachs Group Inc on concerns about an economic slowdown and rising non-performing loan risks.

Goldman downgraded its sector rating on China banks to “neutral” from “attractive” and lowered its 2009 and 2010 earnings estimates by 6 to 7 percent on average, analysts led by Ma Ning wrote in a research note yesterday.

Target prices of Hong Kong-listed Chinese banks, including Industrial and Commercial Bank of China Ltd, China Construction Bank Corp, Bank of China Ltd, Bank of Communications Ltd, China Merchants Bank Ltd, and China Citic Bank Ltd were cut by 26 percent on average.

Banks traded on the Shanghai A-share market have their target prices lowered by an average 41 percent.

China’s 14 publicly traded banks doubled profit on average in the six months to June 30, according to data compiled by Bloomberg News.

Writedowns avoided

They mostly avoided the more than US$500 billion of writedowns and credit losses that pushed global financial companies including Citigroup Inc and UBS AG to post losses, fire workers and raise capital.

“We believe the prospects for further upside earnings surprises and a sector re-rating hinge on more stable global and local macro conditions, and significant government policy easing, which we believe may not materialize near term,” Goldman analysts wrote in yesterday’s report.

Bank shares have dropped an average 50 percent this year on China’s stock exchanges, dragged down by the collapse of the nation’s equity-market bubble.

(Shanghai Daily September 10, 2008)