Title CTBC FHC (2891 TT) Buy, raise TP to NT$25
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Title:CTBC FHC (2891 TT) Buy, raise TP to NT$25
Download File:2891 TT CTBC note 191119--sinopac.pdf 
Summary:Raise TP by 9% to NT$25 (1.35x 2020F P/B); Maintain Buy: We forecast 2019 net profit at NT$44.25bn (+22.8% YoY), or EPS of NT$2.22, and 2020 net profit at NT$43.83bn (-1% YoY), or EPS of NT$2.2. However, considering the narrowing TWD spread amid excessive liquidity in Taiwan, domestic banksĄ¯ reliance on FCY positions to grow their net interest incomes will continue. CTBC BankĄ¯s higher USD exposure vs. peers and agile asset allocation will aid its net interest income performance. We expect that wealth management will gain traction as major central banks maintain loose monetary policies and the Taiwan government encourages capital repatriation. CTBC stands to benefit disproportionately given its high weighting of wealth management business. Valuation-wise, CTBC is attractively valued at 1.15x end-2020 BVPs, toward the lower band of its 3-year P/B of 0.95x-1.65x. We retain a Buy rating but adjust our TP from NT$23 (1.35x 2019F P/B) after advancing our TP basis to 2020.
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