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Investing.com - Nomura/Instinet upgraded Hokuhoku Financial Group (8377:JP) from Neutral to Buy on Thursday, while significantly raising its price target to JPY3,690.00 from JPY1,410.00.
The upgrade comes as Nomura sees strong prospects for earnings improvement at the regional bank, citing benefits from rising interest rates. The firm notes Hokuhoku is particularly well-positioned with ample deposits and lower exposure to unrealized losses compared to peers.
Nomura expects Hokuhoku to achieve a higher pace of ROE improvement due to its historically high overheads and low margins, which provide greater opportunity for operational efficiency gains.
The research firm also highlighted the ongoing narrowing of Hokuhoku’s valuation discount, which had expanded during Japan’s negative interest rate period but has begun to shrink as profitability improves.
Increased shareholder returns represent another catalyst, with Nomura anticipating growth in returns to common shareholders as Hokuhoku improves its capital base and reduces the burden of preferred share dividend payments following a lump-sum redemption of preferred shares.
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