Bank of Beijing - A: 4Q losses and DPS cut overshadow 1Q recovery, expect negative reaction

JPMorgan maintains a Neutral rating on Bank of Beijing with a target price of RMB 6.00. The bank reported a 4Q25 loss of RMB 978 million, falling significantly short of JPMorgan's projected RMB 4.8 billion profit. This disappointment stemmed primarily from RMB 1.28 billion in impairment losses, largely due to a one-time provision adjustment under new financial asset risk classification rules. Although 1Q26 net profit grew 6% year-on-year, asset quality risks are rising. The 1Q26 NPL ratio increased 3 basis points sequentially to 1.32%, and provision coverage fell to 198%, the lowest among covered banks. Forward indicators deteriorated, with the SML ratio rising 11 basis points and overdue loans up 43 basis points in 2H25. Furthermore, a 13% year-on-year decline in 2025 DPS reduced the estimated 2026 dividend yield to roughly 5%, despite a higher payout ratio. Although 1Q26 profitability showed underlying improvement, the overall results missed expectations. With a CET1 ratio of only 8.59% providing a thin capital buffer, JPMorgan expects a negative stock price reaction.