Bank of East Asia Slumps as CICC, Goldman Cut Price Targets

  • Lender posted bigger-than-estimated profit decline on Monday
  • BEA also rejected hedge fund's call to consider selling itself

Bank of East Asia Ltd. fell the most in almost two weeks in Hong Kong stock trading after a bigger-than-estimated profit drop prompted brokerages to cut their share-price targets.

The lender, which has been fending off calls from billionaire Paul Singer’s Elliott Management Corp. to sell itself, slid as much as 3.9 percent during morning trade in Hong Kong, the biggest intraday slump since Feb. 3. The stock declined 3.7 percent to HK$22.25 as of 3:02 p.m. local time.

At least six brokerages including China International Capital Corp. and Goldman Sachs Group Inc. cut their share-price targets after BEA on Monday reported a 17 percent decline in 2015 profit, which was a bigger drop than expected by analysts in a Bloomberg survey. Slowing growth in China dragged after-tax profit from BEA’s mainland business down by 81 percent and almost doubled the unit’s bad-loan ratio.

“China has not yet seen a turnaround, credit cost continues to increase,” CICC analysts Sarah Tian and Mao Junhua wrote in a note Tuesday. “We believe asset risk has not fully surfaced and BEA faces pressure to further improve its provisioning level.”

The CICC analysts lowered their price target for BEA by 24 percent to HK$23.16. In a separate note, Goldman Sachs analysts reiterated their sell rating on the stock as they cut their target price by 3 percent to HK$20.

Bank of East Asia on Monday rejected Elliott’s demand for the lender to consider selling itself, saying it intends to focus instead on improving what it already has.

While Elliott responded afterward by repeating its call for a sale, the CICC analysts said that process was unlikely, leaving BEA’s stock with “few catalysts in the near term.”

Before it's here, it's on the Bloomberg Terminal. LEARN MORE