Does Bank of China’s Capital Boost and Tier 2 Bond Issue Shift The Bull Case For SEHK:3988?

• Bank of China Limited has completed the issuance of RMB 60 billion in 10‑year write‑down tier 2 capital bonds at a 2.16% coupon and gained regulatory approval to raise its registered capital by RMB 27.80 billion via over 27 billion new A shares, while also approving a 2025 interim dividend of RMB 1.094 per ten shares on its ordinary stock.
• Together, the fresh tier 2 funding, registered capital increase and interim dividend reflect a deliberate balance between reinforcing capital buffers and continuing shareholder distributions, which may reshape how investors assess Bank of China’s capital strength and future earnings capacity.
• Next, we’ll examine how this large registered capital increase and tier 2 bond issuance could influence Bank of China’s investment narrative.

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Bank of China Investment Narrative Recap

To own Bank of China, you generally need to be comfortable with a large, systemically important lender that is exposed to China’s rate cycle and property-related credit risk, while seeking relatively stable income. The latest tier 2 bond issuance, registered capital increase and interim dividend do not fundamentally change the key near term drivers, which remain margin pressure and asset quality in a still challenging operating backdrop.

The RMB 60 billion write down tier 2 capital bond issue at a 2.16% coupon is most relevant here, because it directly reinforces regulatory capital at a time when loan quality and non performing loan trends are under close watch. For investors focused on catalysts such as Bank of China’s ability to keep lending and support fee income growth without unduly diluting shareholders, this fresh layer of loss absorbing capital is an important piece of the puzzle.

But investors should also be aware that rising non performing loans tied to China’s property sector could still...

Read the full narrative on Bank of China (it's free!)

Bank of China's narrative projects CN¥752.2 billion revenue and CN¥260.1 billion earnings by 2028. This requires 11.2% yearly revenue growth and an earnings increase of about CN¥36 billion from CN¥224.1 billion today.

Uncover how Bank of China's forecasts yield a HK$5.26 fair value, a 16% upside to its current price.

Exploring Other Perspectives

Six members of the Simply Wall St Community currently see Bank of China’s fair value anywhere between HK$3.63 and HK$9.60, underscoring very different expectations. You may want to compare those views with the ongoing pressure on net interest margins and what that could mean for the bank’s ability to grow earnings while maintaining its dividend profile.

Explore 6 other fair value estimates on Bank of China - why the stock might be worth 20% less than the current price!

Build Your Own Bank of China Narrative

Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

• A great starting point for your Bank of China research is our analysis highlighting 4 key rewards that could impact your investment decision.
• Our free Bank of China research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate Bank of China's overall financial health at a glance.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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