Bank of Communications Co Ltd - FY25 results in line with expectations
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- FY25 net profit increased by 2.18% y/y to Rmb 96.5bn, in line with expectation
- Expect mid-single digit earnings growth for FY26/27F with stabilising NIM trend and steady loan volume growth
- Asset quality outlook is largely stable while we see further pressures on retail loans, following a 50bps y/y increase in retail NPL ratio in FY25
- Reiterate BUY with TP revised down to HKD 7.75 to reflect the retail loan risks; offering >5% dividend yield for FY26/27F
FY25 revenue increased by 2.05% y/y to Rmb 265.6bn and net profit to shareholders increased by 2.18% y/y to Rmb 96.5bn, largely in line with consensus expectation. FY25 NIM dropped by 7bps y/y to 1.20% while 4Q25 NIM recovered by 2bps q/q to 1.21%. Total loan balance increased 6.6% y/y to Rmb 9.1tn. On the asset quality side, NPL ratio dropped by 3bps y/y or increased by 2bps q/q to 1.28%. Though the overall asset quality remains stable, retail loan NPL ratio increased by 50bps y/y to 1.58%. NPL coverage ratio increased by 6.4ppts from Dec 25’s level to 208.4%. CET-1 ratio remains at a healthy level of 11.4%. ROE fell by 0.7ppt y/y to 8.38%.
Outlook:
- NIM: stabilising trend in FY26F
We expect an overall stabilising trend of NIM in FY26F for BOCOM. Year-to-date in 2026, loan yield has dropped by 15bps y/y while flat q/q. The repricing of deposits will lower down the funding costs and support NIM. Year-to-date new deposit rate is largely flat q/q vs 4Q25 while seeing a significant drop y/y.
2. Loan volume growth: target volume increment no lower than FY25
BOCOM targets to deliver the new loan volume in FY26F no less than that of 2025. This will be mainly driven by the corporate side, while the retail side increment would be lower y/y, after aggressive growth in retail loans in previous years. Still, mortgage is likely to be on a growth track. On the corporate side, 2M26 loan volume growth increased by 10.9% y/y. Corporate credit demand in 1Q26 has been generally stable, with ample project reserves for the rest of the year.
3. Asset quality: keeping an eye on retail loans
NPL ratio dropped by 3bps y/y to 1.28% by the end of FY25 while special mention loan ratio increased by 8bps y/y to 1.65%. The overdue loan ratio was 1.46%, up by 8bps y/y. The full-year new NPL ratio remained largely flat y/y, staying below 1% for three consecutive years.
Looking ahead, retail loan remains the key area to watch for BOCOM while we expect the overall NPL ratio to be stable. BOCOM has seen high growth in retail loans in previous years, leading to asset quality pressures in the challenging macroeconomic environment. Retail loan NPL ratio increased by 50bps to 1.58% with asset quality deterioration in all retail loan products.
In 2026, BOCOM will launch a "Retail Asset Quality Improvement Special Action," aiming for overall stable asset quality throughout the year through three initiatives: 1) accelerating the recovery and disposal of existing retail NPL; 2) strengthening management of maturing loans, enhancing collection capabilities, and reducing NPL deterioration; 3) dynamically optimising access standards, adjusting customer structure, strengthening technological empowerment, and improving the fraud risk prevention and control system.
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