Bank of China Ltd.

We expect BOC's net interest margin (NIM) to continue to narrow by 10-15 basis points over the next 24 months. This is mainly due to the bank's lowering of rates for existing mortgage loans and a cut in policy rates as part of the Chinese government's stimulus package in September 2024. Cuts in deposit rates may gradually temper the NIM pressure. Meanwhile, lingering NIM pressure could reduce the return on average assets (ROAA) to 0.65%-0.70% over the next two years, from 0.85% in 2023. Annualized ROAA was 0.76% in the first six months of 2024. BOC's diversified loan portfolio will mitigate these strains. Mainland real-estate loans accounted for less than 4.5% of the group's loan book as of end-June 2024.

...Bank of China Ltd.'s (BOC) weakening profitability will continue to deplete its capital buffer. In our base case, BOC's risk-adjusted capital (RAC) ratio could fall to 7.2%-7.5% over 2025-2026, from 7.5% at end-2023. This assumes high single digit loan growth per annum and a potential capital injection of RMB100 billion-RMB300 billion from the central government in next 24 months. We expect BOC's net interest margin (NIM) to continue to narrow by 10-15 basis points over the next 24 months. This is mainly due to the bank's lowering of rates for existing mortgage loans and a cut in policy rates as part of the Chinese government's stimulus package in September 2024. Cuts in deposit rates may gradually temper the NIM pressure. Meanwhile, lingering NIM pressure could reduce the return on average assets (ROAA) to 0.65%-0.70% over the next two years, from 0.85% in 2023. Annualized ROAA was 0.76% in the first six months of 2024....

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