Bank of Beijing - A: Model Update

We are updating our model to incorporate new 3Q26 forecasts. We now expect 3% y/y revenue growth and 4% y/y profit growth in 3Q. We are revising up our 2026-28 adjusted net profit assumptions by 6.5%/4.0%/1.9%, respectively, after our recent interaction with Investor Relations. In further details, we are lowering our impairment charge assumptions for 2026-28 as we believe the high base in 2025 should be a one-off, with the asset quality showing a stabilization trend in 2Q26. Reflecting the forecast upgrades, we are raising our Dec-27 PT by 3.2% to Rmb4.85. We maintain our Underweight rating; key concerns include a weak CET1 level, weaker long-term profitability, and higher asset quality risks. Our Dec-27 PT of Rmb4.85 is based on DDM, assuming a cost of equity of 11.3%, a normalized ROE of 6.8% and a terminal date of 31 December 2028.