BEA loses in the competitive mortgage segment

But it's successful in holding share in business loans.

According to CLSA, in its Hong Kong operations BEA is the fifth-largest player by domestic loans and the largest surviving family-controlled (ie, by the Li family) - and thus independent - bank.

Here's more from CLSA:

Our analysis of market share and profitability shows that BEA has been successful in holding share in business loans and deposits overall, but has clearly lost in the competitive mortgage segment. BEA is also materially less profitable than its larger peers.

Not cheap on fundamentals, M&A supportive
For its ROE profile (around 10%), BEA is not cheap at 1.1x book, but its status as largest remaining independent bank should attract a small premium for M&A appeal.

However, even when we add 15% to our fundamental valuation, we only derive a HK$34.00 target, leaving little upside. We downgrade our rating from Outperform to Underperform.