Daiwa has released a research report initiating coverage on CCB (00939) with a "Buy" rating and a target price of HK$11.05, positioning it as the top pick among Chinese banks. The brokerage highlights that CCB, the second-largest bank in China by total assets, is expected to deliver a return on equity of 10.1% in 2025, ranking second among state-owned banks, supported by funding cost advantages and fee income contributions.

The report notes that CCB holds the nation's largest mortgage loan portfolio, amounting to RMB 6 trillion, which accounts for 22% of its total loans. While market concerns over delinquency risks have weighed on its valuation, the bank's exposure to the retail loans currently under pressure is the lowest among peers, representing just 11% of its loan book.

Daiwa points out that CCB is currently trading at 0.58 times its 2026 forecast price-to-book ratio, with a dividend yield of 5.1%. Despite its superior return on equity compared to its peers, the stock trades at a discount, implying an equity cost of capital of 14.5%, the highest among the four major state-owned banks. This reflects market demands for higher returns due to CCB's property exposure, but the brokerage believes this overstates the actual risk.