Bank of China Jumps 7.2% to HK$5.90 on Strong H1 Earnings

Bank of China (3988.HK) jumped 7.2% to HK$5.90 on August 31, hitting a record high as investors cheered the bank’s first-half 2026 earnings. The lender reported net profit of 1,235.94 billion yuan, up 5.1% year-on-year, and net interest income climbed 10.2%, signaling that China’s banking sector is recovering from years of margin compression. The stock now trades at a P/E of 6.47, well below the Meyka fair value estimate, offering potential upside for long-term investors.

H1 earnings beat expectations on margin recovery

Bank of China disclosed its 2026 interim results on August 28, posting operating revenue of 3,569.03 billion yuan, up 8.48% year-on-year. Net profit attributable to shareholders reached 1,235.94 billion yuan, up 5.1% year-on-year, the highest profit growth rate among China’s six major state-owned banks. The standout metric was net interest income, which increased 10.2% year-on-year, with the net interest margin expanding to 1.27%, up 1 basis point. This reversal marks a turning point after years of margin pressure.

Record high reflects investor confidence in banking recovery

The H-share of Bank of China touched HK$5.86 during the session on August 31, up more than 4% from the previous close and hitting its highest level since listing. The broader rally extended across China’s banking sector, with China CITIC Bank, Bank of Beijing, and Postal Savings Bank of China all posting gains. The collective surge signals that investors now believe the worst of the margin squeeze is over, and the bank trades below fair value at current levels.

Valuation gap suggests further upside potential

Bank of China trades at a trailing P/E of 6.47, well below the Meyka fair value benchmark. Meyka rates the stock B+ with a neutral recommendation, but the DCF score of 5 signals a strong buy on fundamentals. The 12-month price forecast of HK$5.23 sits below the current price, yet the 3-year forecast of HK$6.46 implies 9.5% upside. With a dividend yield of 4.6% and a book value of HK$10.08 per share, the stock offers income plus capital appreciation potential for patient investors.

Margin recovery driven by lower deposit costs

The key driver of the margin rebound is a decline in the cost of deposits, as Chinese households have reduced savings rates and shifted funds into higher-yielding investments. This improvement in liability costs has allowed Bank of China to stabilize and expand its net interest margin despite a competitive lending environment. The 1 basis point expansion may seem modest, but it reverses a multi-year trend and signals that the industry’s profitability floor is holding.

Final Thoughts

Bank of China’s record high reflects genuine earnings momentum and margin stabilization, not speculation. With a Meyka B+ grade, a P/E of 6.47, and a 4.6% dividend yield, the stock offers both income and value for long-term Hong Kong investors.

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The content shared by Meyka AI PTY LTD is solely for research and informational purposes.  Meyka is not a financial advisory service, and the information provided should not be considered investment or trading advice.