Securities Investment: Daxin Bank chasing backward

Great Fortune Data Research we are optimistic about the medium-term prospects of daxin Banking Group (2356). As the group increased its capital by raising funds in May, we consider that the opportunities for substantial write-off and profit dilution have been reduced. The Dah Sing Bank Group is a laggard in local banking stocks and will have a breakthrough in the future as credit markets stabilise and economic recovery signs up. 　　According to our estimate of the nominal value of the unit for 09, we have given the unit a target price of $9.10 (yesterday 7.54 yuan). The quality of assets is still stable since the economic environment deteriorated sharply in the second half of 08, Daxin Bank Group has been taking defensive tactics. Therefore, even if the asset quality of the group has remained stable for the current year, its loan portfolio has shrunk as in the industry, but on the other hand, the net spreads of the group are expected to improve with the widening of the spreads between the prime rate and the Hong Kong interbank rate. Because the group's financial products sales are weak, its non-interest income is going downhill. 　　On the other hand, although the cost of Hong Kong has been frozen, its operating expenses will be slightly increased under the expansion scheme of the mainland business of the group. The quality of loans for commercial lending and trade financing has deteriorated sharply over the past year and the group has scaled back its business. Moreover, as the credit spreads were extended to the Hong Kong interbank Interest Rate (+100-200) as a basis for the +30-50 of the Hong Kong interbank rates before the financial crisis, Daxin Bank Group has granted more syndicated loans to larger local companies. 　　While the group's credit card business remains robust, the group has reduced the growth of its personal loan portfolio under more stringent credit control measures. The company has made a 91% provision for its externally managed financial investments, so even if the group makes further provision, it is only minor. In response to the government's economic stimulus measures, the bank of Chongqing, a 20%-interest consortium of the Daxin Banking group, recorded double-digit loan growth and improved asset quality. Although the group's wholly-owned Dah Sing Bank (China) has been making a profit since its opening in August 2008, it has contributed little to the profitability of the Dah Sing banking group.