Bank of America Securities has issued a research report stating that it has lowered its profit forecasts for Agricultural Bank of China (ABC) (01288, 601288.SH) by 1% to 2% for 2026 and 2027. This adjustment is based on reduced earnings projections and an increase in the cost of equity by 50 basis points. The target price for ABC's H-shares has been cut from HK$6.32 to HK$5.80, while the target price for its A-shares has been reduced from RMB 7.32 to RMB 6.40. The bank maintains a "Neutral" rating on the H-shares and an "Underperform" rating on the A-shares.

ABC reported a net profit of RMB 2,910 billion for the previous year, representing a year-on-year increase of 3.2%, which was 0.9% lower than the bank's expectations. Core earnings saw a slight decline of 0.1% compared to the previous year and were 1.8% below expectations. The return on equity decreased by 0.3 percentage points to 10.2%, while the core tier 1 capital adequacy ratio dropped by 35 basis points to 11.08%. The dividend payout ratio remained largely stable, with the dividend per share rising by 3.1% year-on-year to RMB 0.2495. The dividend yields for H-shares and A-shares were 5.2% and 3.8%, respectively, which are relatively low among peers.

The report indicated that ABC's net interest margin in the fourth quarter of last year fell by 7 basis points quarter-on-quarter to 1.2%, a performance weaker than that of its peers. Fee income increased by 16.6% year-on-year, driven by an 88% surge in agency commissions. Other non-interest income rose by 22% year-on-year, supported by gains from the disposal of debt securities and foreign exchange earnings. Revenue grew by 1.7% year-on-year, while operating costs increased by 4.9%, leading to a 1.1 percentage point rise in the cost-to-income ratio to 37.3%.