Investment opportunities show up

232 views

Published on

0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
232
On SlideShare
0
From Embeds
0
Number of Embeds
2
Actions
Shares
0
Downloads
2
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Investment opportunities show up

  1. 1. China Banking Sector Investment opportunities show up Sector Report Sector Rating: Outperform↑ Summary 31 March 2010 Tightening policies slowed, liquidity remained ample. Monetary policies this year will be relatively tighter than the loose policies last year. The Special Views: increase in loan growth reflected that relatively loose polices were being While China will implement adopted. The complementary tightening policies are also looser than what we tightening policies this year, it have expected. The market has basically digested the unexpected tightening measures implemented at the beginning of the year. In March, the Central will tighten its loose monetary Bank preferred to withdraw liquidity via open market operations. The policies back to the normal Central Bank withdrew RMB522bn from market this month, weakening level but not execute absolute market’s expectation on any uplifts of RRR and interest rates in the short tightening. The tightening term. Meanwhile, the Government might implement rate hikes at a time later level will be looser than what than expected. we expected at the beginning 2Q loan growth expected to stay steady. We expect loans issued in 1Q would of the year. The market has account for about 33% of the total new loans in 2010. If the amount of loans basically digested the issued in 2Q could be controlled at c.30% of the total loans of the year, unexpected tightening demand pressure would be less than that observed in 1Q, indicating the toughest period has passed. In addition, loan balance growth slumped in 1Q measures implemented at the while the trend will return to steady with a slight fall in 2Q. We have been beginning of the year. Further stressing that the change in loan balance growth is a more crucial factor than uplifts of RRR and interest the QoQ change in new loans. rates in the near term are less expected. With loan growth in Fundamentals remained stable in the near term. According to surveys conducted by the Central Bank, loan demand climate index rebounded in 2Q and fundamentals of China 1Q. In particular, the growth of new loans from small enterprises surpassed banking industry remained that of medium and large enterprises, reflecting a strong loan demand from steady, we expect the 1Q the domestic consumption sector. NIM continued to improve steadily, with banking results will be in line the banks’ NIM in 4Q continuing to rebound. As the proportion of loan with with or slightly better than interest rate higher than benchmark is increasing, we expect the NIM growth in 1Q might be slightly higher than that in 4Q. The economic recovery and market expectation. relatively large new loan amount will ensure a stable asset quality this year. Uncertainties of refinancing We expect the earnings of banks in 1Q will be in line with or slightly better diminished; index futures and than market expectation. margin financing will serve as catalysts to the sector. We Uncertainties of refinancing diminished; index futures and margin financing serve as catalysts to the sector. Among the 7 H-share listed banks, recommend investors to grasp CCB is the only bank that has not announced any refinancing plan. the investment opportunities According to the refinancing scales that have been announced and for the sector in 2Q and uplift undertaken or may announce and undertake, we expect the total refinancing sector rating to “Outperform”. scale of the 14 banks to be slightly above RMB400.0bn and that of the 7 H- share listed banks will reach over RMB300.0bn. As the heavyweights of CSI300 Index with low valuation, the introduction of index futures and margin financing will serve as catalysts to the banking sector. Uplift sector rating to “Outperform”. With the slowdown of tightening Li Shanshan frequency in 2Q, the market has basically digested the “over-tightening” measures adopted at the beginning of the year. Given less expectation of an lishanshan@bocomgroup.com increase in RRR, rate hike may come later than expected with a stable loan Tel: (8610) 85182131x77 growth. Fundamentals of the banking sector are stable. 1Q banking results will be in line with or slightly better than market expectation. We recommend Wan Li investors to grasp the investment opportunities for the sector in 2Q and uplift wanli@bocomgroup.com sector rating to “Outperform”. We recommend banks with low valuation and Tel: (8610) 85182130x74 high beta. We raise MSB to “Buy” with TP at HK$10.14, maintain CITIC Bank at “Buy” and keep BOC, CCB and BoComm at “LT Buy”. Note: CMB is now in our restricted list. No rating will be assigned temporarily. Download our reports from Recommendations and valuations Bloomberg:BOCM〈enter〉 H-share 09EPS 10EPS 11EPS 09PE 10PE 10PB Rating CITICB 0.39 0.49 0.54 13.2 10.5 1.63 Buy CMB 0.93 1.16 1.35 20.0 16.1 2.97 - MSB 0.57 0.62 0.74 12.5 11.5 1.57 Buy BoComm 0.61 0.68 0.82 12.7 11.4 1.83 LT-Buy CCB 0.46 0.58 0.67 12.0 9.6 1.99 LT-Buy ICBC 0.32 0.37 0.44 11.4 9.7 1.47 LT-Buy BOC 0.39 0.46 0.52 13.4 11.3 2.16 Neutral Avg 13.6 11.4 1.94 Source: BOCOM Int’l
  2. 2. China Banking Sector 31 March 2010 Investment Opportunities show up 1. Tightening policies slowed, liquidity remained ample Monetary policies this year will be relatively tighter than the loose policies last year. The increase in loan growth reflected that relatively loose polices were being adopted. The complementary tightening policies are also looser than what we have expected. The market has basically digested the unexpected tightening measures implemented in the beginning of the year. In March, the Central Bank preferred to withdraw liquidity via open market operations. The Central Bank withdrew RMB522bn from market this month, contrasted with its net injection of RMB552 into the market in February. Uplift of RRR in the short term is less expected. Central Bank Bills and positive buy-backs matured in April to May amounted to around RMB1tn. Meanwhile, the Government might implement rate hikes at a time later than market expected as leaders of the Central Bank recently remarked that cautious approaches should be adopted in handling rate hikes. : Chart 1:Open market operations conducted by the Central Bank from Jan 09 to May 10 Matured Matured Positive Bills Positive Net In hundred m Bills buy-backs Total issued Buy-backs Total investment Jan-09 3,790 2,020 5,810 700 1,300 2,000 3,810 Feb-09 2,025 1,000 3,025 1,400 5,100 6,500 -3,475 Mar-09 3,760 4,450 8,210 2,700 4,750 7,450 760 Apr-09 3,660 4,100 7,760 3,050 5,100 8,150 -390 May-09 2,520 4,900 7,420 3,100 3,300 6,400 1,020 Jun-09 3,330 4,100 7,430 3,100 3,300 6,400 1,030 Jul-09 3,555 4,600 8,155 2,800 3,850 6,650 1,505 Aug-09 4,800 2,350 7,150 4,380 2,650 7,030 120 Sep-09 7,770 3,250 11,020 6,030 2,200 8,230 2,790 Oct-09 3,200 2,400 5,600 3,810 3,350 7,160 -1,560 Nov-09 3,200 1,050 4,250 3,090 4,150 7,240 -2,990 Dec-09 2,450 3,800 6,250 4,080 2,660 6,740 -490 Jan-10 2,830 3,610 6,440 3,160 3,930 7,090 -650 Feb-10 3,100 4,550 7,650 2,130 300 2,430 5,220 Mar-10 6,860 800 7,660 8,480 4,400 12,880 -5,220 Apr-10 3650 3060 6710 May-10 3130 300 3430 Source: wind, BOCOM Int’l Download our reports from Bloomberg: BOCM〈enter〉 Page 2
  3. 3. China Banking Sector 31 March 2010 Investment Opportunities show up Chart 2: Central Bank Bills and positive buy-backs matured from Jan 09 to May 10 Central bank notes matured Positive buy-backs matured 12,000 10,000 8,000 6,000 4,000 2,000 - J-09 M-09 M-09 J-09 S-09 N-09 J-10 M-10 M-10 Source: wind, BOCOM Int’l : Chart 3:Issuance of 3-month Central Bank Bills Chart 4 : Issuance of 1-year Central Bank bills remained steady remained steady 3-month central bank notes volume 1-year central bank notes volume 3-month central bank note interest rate 2,500 5% 2,000 4% 1-year central bank note interest rate 2,000 4% 1,500 3% 1,500 3% 1,000 2% 1,000 2% 500 1% 500 1% - 0% - 0% A-07 J-07 N-07 F-08 M-08 A-08 J-09 M-09 A-09 D-09 M-10 J-07 A-07 J-07 O-07 J-08 M-08 A-08 J-09 O-09 J-10 Source: wind, BOCOM Int’l Source: wind, BOCOM Int’l : Chart 5:Repo market interest rates of bills from : Chart 6:Bill discount rates from Jan 08 to Mar 10 Jan 08 to Mar 10 3.0% repo reverse repo interbank discount-buy 4% interbank discount-sell 2.5% 2.0% 3% 1.5% 1.0% 2% 0.5% 0.0% 1% J-09 M-09 M-09 J-09 S-09 N-09 J-10 M-10 J-09 M-09 M-09 J-09 S-09 N-09 J-10 M-10 Source: wind, BOCOM Int’l Source: wind, BOCOM Int’l Download our reports from Bloomberg: BOCM〈enter〉 Page 3
  4. 4. China Banking Sector 31 March 2010 Investment Opportunities show up Chart 7 : Repurchase rate of interbank secured : Chart 8:Interbank Offered Rate from Apr 03 to bonds from Jan 05 to Feb 10 Feb 10 5% Weighted average repurchage rate of Weighted average interbank offered rate 5% interbank secured bonds 4% 4% 3% 3% 2% 2% 1% 1% 0% 0% J-05 N-05 S-06 J-07 M-08 M-09 J-10 J-04 F-05 M-06 A-07 M-08 J-09 Source: PBoC, BOCOM Int’l Source: PBoC, BOCOM Int’l 2. 2Q loan growth expected to stay relatively steady As the regulatory authority planned a more balance loan issuance throughout the year, the quarterly new loans proportion would be 3:3:2:2. The proportion of new loans issuance in 1Q decreased largely when compared to previous years. We assumed new loans in March would reach RMB400bn and the total new loans issued in 1Q would account for 33% (compared to 47.9% in 2009) of the total new loans of RMB7.5tn in 2010. If the amount of loans issued in 2Q could be controlled at c.30% of the total loans of the year, demand pressure would be less than that observed in 1Q, indicating the toughest period has passed. Looking at the YoY growth of loan balance, loan balance growth slumped in 1Q while the trend is expected to return to steady with a slight fall in 2Q (see chart 9). We believe the change in loan balance growth is a more crucial factor that the QoQ change in new loans. : Chart 9:RMB loan balance growth in 2Q10 expected to remain steady 40 (%) Growth and estimate of loan balance 35 1Q 2Q 30 25 20 15 10 5 0 J-07 J-07 N-07 A-08 S-08 F-09 J-09 D-09 M-10 O-10 Source: PBoC, BOCOM Int’l Download our reports from Bloomberg: BOCM〈enter〉 Page 4
  5. 5. China Banking Sector 31 March 2010 Investment Opportunities show up 3. Fundamentals remained stable in the near term According to surveys conducted by the Central Bank, loan demand climate index rebounded in 1Q. In particular, the growth of new loans from small enterprises surpassed that of medium and large enterprises, reflecting a strong loan demand from the domestic consumption sector. NIM continued to improve steadily, with the banks’ NIM in 4Q rebounding 5bps to 10bps. Looking into the announced results from listed banks, the proportion of loan with interest rate higher than benchmark increased in 1Q. We expect the NIM growth in 1Q might be slightly higher than that in 4Q. The economic recovery and relatively large new loan amount will ensure a stable asset quality this year. We expect the earnings of banks in 1Q will be in line with or slightly better than market expectation. : Chart 10:Quarterly NIM of listed banks ICBC CCB BOC CIB SDB HXB Bocomm 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 资料来源:各公司报表 交银国际 : Char 11:Rebound in loan demand climate index 70 (%) Loan demand climate index 68 66 64 62 60 1Q04 4Q04 3Q05 2Q06 1Q07 4Q07 3Q08 2Q09 1Q10 Source: PBoC, BOCOM Int’l Download our reports from Bloomberg: BOCM〈enter〉 Page 5
  6. 6. China Banking Sector 31 March 2010 Investment Opportunities show up 4. Uncertainties of refinancing diminished; index futures and margin financing serve as catalysts to the sector Among the 7 H-share listed banks, CCB is the only bank that has not announced any refinancing plan. Market uncertainties over refinancing have diminished and all bad news of refinancing have basically been digested. According to the refinancing scales that have been announced and undertaken or may announce and undertake, we expect the total refinancing scale of the 14 banks to be slightly above RMB400.0bn and that of the 7 H- share listed banks will reach over RMB300.0bn. As the heavyweights of CSI300 Index with low valuation, the introduction of index futures and margin financing will serve as catalysts to the banking sector. Chart 12: Core CAR and refinancing scale of listed banks in 2008-2009 Financing excluded Financing included Refinancing ‘000m Refinancing to be 2008 1H2009 3Q2009 2009E 2010E 2011E 2009E 2010E 2011E began launched ICBC 10.75% 9.97% 9.86% 9.90% 9.58% 9.68% 9.90% 10.30% 10.32% 250 500 CCB 10.17% 9.30% 9.57% 9.31% 9.09% 9.17% 9.31% 10.06% 10.01% 600 BOC 10.81% 9.43% 9.37% 9.07% 8.51% 8.38% 9.07% 9.33% 9.10% 400 500 BoComm 9.54% 8.81% 8.08% 8.15% 8.12% 8.15% 8.15% 9.98% 9.74% 420 CMB 6.56% 6.50% 6.61% 7.39% 7.27% 7.36% 220 MSB 6.60% 5.90% 6.02% 8.65% 7.96% 7.80% 275 SPDB 5.03% 4.68% 6.76% 6.81% 6.80% 6.90% 6.81% 10.28% 9.84% 398 CIB 8.94% 7.41% 7.50% 7.41% 8.98% 8.66% 180 SDB 5.27% 5.08% 5.20% 5.03% 7.49% 7.39% 100 HXB 7.46% 6.84% 6.55% 6.13% 5.88% 5.82% 6.13% 8.18% 7.80% 120 CITICB 12.32% 10.45% 9.84% 8.88% 8.58% 8.37% BOB 16.42% 13.48% 12.92% 11.49% 10.66% NBCB 14.60% 11.56% 10.02% 9.15% 12.22% 11.22% 45 NJCB 20.68% 13.31% 11.63% 11.40% 14.34% 12.77% 50 Total 1940 2118 Source: Companies’ financial statements, BOCOM Int’l Download our reports from Bloomberg: BOCM〈enter〉 Page 6
  7. 7. China Banking Sector 31 March 2010 Investment Opportunities show up Chart 13: CAR estimates of listed banks in 2008-2011E Financing excluded Financing included 2008 1H2009 3Q2009 2009E 2010E 2011E 2009E 2010E 2011E ICBC 13.06% 12.09% 12.60% 12.36% 12.10% 11.81% 12.36% 12.83% 12.45% CCB 12.16% 11.97% 12.11% 11.70% 11.01% 10.69% 11.70% 11.98% 11.53% BOC 13.43% 11.53% 11.63% 11.14% 11.33% 10.83% 11.14% 12.15% 11.55% BoComm 13.47% 12.57% 12.52% 12.00% 11.60% 10.93% 12.00% 13.46% 12.52% CMB 11.34% 10.63% 10.54% 11.07% 10.58% 10.44% MSB 9.22% 8.48% 8.57% 11.22% 10.29% 10.09% SPDB 9.06% 8.11% 10.16% 10.05% 9.46% 9.07% 10.05% 12.93% 12.02% CIB 11.24% 9.21% 10.63% 10.41% 11.70% 11.03% SDB A 8.58% 8.62% 8.60% 8.59% 10.80% 10.55% HXB 11.40% 10.36% 10.01% 11.75% 10.58% 9.79% 11.75% 12.88% 11.77% CITICB 14.32% 12.04% 11.24% 10.29% 9.77% 9.39% BOB 19.66% 16.12% 15.21% 13.22% 12.02% NBCB 16.15% 12.84% 11.25% 10.24% 13.10% 11.94% NJCB 24.12% 15.20% 13.21% 13.47% 15.14% 13.41% Source: Companies’ financial statements, BOCOM Int’l Chart 14: Accumulative gain or loss of H-share listed banks since Jan 2010 4% 2% 0% -2% CITICB CMB MSB BoComm CCB BOC ICBC HSI -4% -6% -8% -10% -12% -14% Source: BOCOM Int’l Chart 15: Accumulative gain or loss of A-share listed banks since Jan 2010 10% 5% 0% P B m B B B BC B B IB B C XB B B M IC BC C D om M JC SD S BO BO C -5% O IC H C M SP IT C N N C C C SH Bo -10% -15% Source: BOCOM Int’l Download our reports from Bloomberg: BOCM〈enter〉 Page 7
  8. 8. China Banking Sector 31 March 2010 Investment Opportunities show up 5. Uplift sector rating to “Outperform” With the slowdown of tightening frequency in 2Q, the market has basically digested the “over-tightening” measures adopted in the beginning of the year. Given less expectation of an increase in RRR, rate hike may come later than expected with a stable loan growth. Fundamentals of the banking sector are stable. 1Q banking results will be in line with or slightly better than market expectation. We recommend investors to grasp the investment opportunities for the sector in 2Q and uplift sector rating to “Outperform”. We recommend banks with low valuation and high beta. We raise MSB to “Buy”, maintain CITIC Bank at “Buy” and keep BOC, CCB and BoComm at “LT Buy”. MSB (Uplift rating to “Buy”): Transitional period of departmental reform has passed and specialized management standard is enhanced; “Shangdaitong” is well-positioned with prosperous growth. New loans generated from “Shangdaitong” is expected to reach RMB100.0bn or above, providing upside potential to interest spread. Valuation is in the safety margin. 2010 PE and PB are just 11.4x and 1.55x respectively. Low PB ensures the bottom-line of valuation. As a bank with high beta, MSB possesses strength in the rebound of share price. TP: HK$10.14 (Upside: 26.05%) CITIC Bank (Maintain “Buy”): No refinancing pressure in the short run; Market was too worried about the loan-deposit ratio issue. Companies may fulfill loan-deposit ratio requirement through strengthening asset and liability management. In fact, loan-deposit ratio of CITIC Bank has met the regulatory requirement by the end of 2009. Valuation is in the safety margin. 2010 PE and PB are just10.5x and 1.63x, respectively. Low PB ensures the bottom-line of valuation. CITIC Bank has encountered the largest decrease among the H-share listed banks this year. As a bank with high beta and low valuation, CITIC Bank possesses strength in the rebound of share price. Note: CMB is now in our restricted list. No rating will be assigned temporarily. Download our reports from Bloomberg: BOCM〈enter〉 Page 8
  9. 9. China Banking Sector 31 March 2010 Investment Opportunities show up Chart 16: Comparison of valuations of listed banks A/H H-share BVPS EPS PE PB Profit Growth pre- Rating mium 2009E 2010E 2009E 2010E 2011E 2009E 2010E 2009E 2010E 2009E 2010E CITICB 2.74 3.13 0.39 0.49 0.54 13.2 10.5 1.86 1.63 13.3% 25.9% 46.7% Buy CMB 4.83 6.27 0.93 1.16 1.35 20.0 16.1 3.86 2.97 -15.4% 40.0% -11.8% - MSB 4.02 4.52 0.57 0.62 0.74 12.5 11.5 1.76 1.57 59.8% 8.7% 10.2% Buy BoComm 3.36 4.26 0.61 0.68 0.82 12.7 11.5 2.32 1.87 5.8% 27.5% 6.8% LT-Buy CCB 2.39 2.77 0.46 0.58 0.67 12.0 9.6 2.30 1.99 15.3% 26.0% 4.1% LT-Buy BOC 2.15 2.47 0.32 0.37 0.44 11.4 9.7 1.69 1.47 27.2% 23.9% 20.6% LT-Buy ICBC 2.03 2.40 0.39 0.46 0.52 13.4 11.3 2.54 2.16 16.1% 23.8% -2.9% Neutral H-share avg 13.6 11.5 2.30 1.91 16.0% 25.0% 12.8% HSBC (US$) 7.84 8.19 0.34 0.66 0.79 32.37 16.58 1.39 1.33 1.9% 95.3% Neutral A-share BVPS EPS ROAE ROAA 2008 2009E 2010E 2008 2009E 2010E 2011E 2008 2009E 2010E 2008 2009E 2010E HXB 5.49 6.09 7.47 0.62 0.73 0.85 0.99 15.2% 12.6% 13.8% 0.46% 0.46% 0.58% CIB 9.80 11.91 15.92 2.28 2.66 2.91 3.37 25.9% 24.5% 22.1% 1.22% 1.16% 1.23% BOB 5.43 6.15 7.21 0.87 0.94 1.25 1.57 17.9% 16.2% 18.7% 1.40% 1.25% 1.34% CMB 5.41 4.83 6.27 1.43 0.93 1.16 1.35 28.6% 20.8% 21.9% 1.46% 0.99% 1.12% NBCB 3.52 3.90 5.63 0.53 0.58 0.77 0.99 15.8% 15.7% 17.0% 1.49% 1.14% 1.28% MSB 2.86 4.02 4.52 0.42 0.57 0.62 0.74 15.2% 17.6% 14.4% 0.80% 1.01% 0.86% CITICB 2.44 2.74 3.13 0.34 0.39 0.49 0.54 14.8% 14.9% 16.6% 1.21% 1.14% 1.18% CCB 1.99 2.39 2.77 0.40 0.46 0.58 0.67 20.9% 20.8% 22.3% 1.31% 1.26% 1.34% BoComm 2.96 3.36 4.26 0.58 0.61 0.68 0.82 20.8% 19.4% 19.2% 1.19% 1.00% 1.07% NJCB 6.15 6.66 10.28 0.79 0.87 1.17 1.42 13.7% 13.6% 13.8% 1.72% 1.41% 1.42% SDB 5.28 6.59 10.15 0.20 1.62 1.75 2.08 4.2% 27.3% 22.3% 0.15% 0.96% 1.03% SPDB 7.36 7.70 11.08 2.21 1.49 1.55 1.85 35.8% 24.1% 18.0% 1.13% 0.91% 0.98% ICBC 1.81 2.03 2.40 0.33 0.39 0.46 0.52 19.4% 20.1% 21.1% 1.20% 1.19% 1.28% BOC 1.84 2.15 2.47 0.25 0.32 0.37 0.44 14.2% 15.9% 16.6% 0.98% 1.04% 1.09% PB PE Profit Growth Cap Rating Cur- 2008 2009E 2010E 2008 2009E 2010E 2011E 2008 2009E 2010E 2011E rent HXB 2.33 2.10 1.71 20.8 17.5 15.0 12.9 46.1% 18.3% 47.2% 16.6% 638 Buy CIB 3.80 3.13 2.34 16.4 14.0 12.8 11.0 32.6% 16.6% 25.9% 16.1% 1,864 Buy BOB 3.12 2.75 2.35 19.5 18.0 13.6 10.8 61.8% 8.0% 32.7% 26.0% 1,054 LT-Buy CMB 3.04 3.41 2.62 11.5 17.6 14.2 12.2 38.3% -15.4% 40.0% 16.9% 3,549 - NBCB 4.61 4.17 2.89 30.5 27.9 21.1 16.5 40.0% 9.4% 50.1% 28.2% 406 LT-Buy MSB 2.72 1.94 1.73 18.6 13.8 12.7 10.5 24.5% 59.8% 8.7% 20.2% 1,712 Buy CITICB 3.06 2.73 2.39 21.9 19.3 15.3 13.7 60.7% 13.3% 25.9% 11.7% 2,621 LT-Buy CCB 2.87 2.40 2.07 14.5 12.5 10.0 8.6 34.1% 15.3% 26.0% 16.4% 12,883 LT-Buy BoComm 2.81 2.48 2.00 14.3 13.6 12.2 10.2 38.6% 5.8% 27.5% 20.3% 3,954 LT-Buy NJCB 2.89 2.67 1.73 22.4 20.4 15.2 12.5 60.1% 9.7% 34.1% 22.0% 326 LT-Buy SDB 4.48 3.59 2.33 119.6 14.6 13.5 11.4 -77% 719.3% 28.5% 18.5% 734 LT-Buy SPDB 3.12 2.99 2.07 10.4 15.4 14.8 12.4 127% 5.4% 29.7% 19.5% 2,029 LT-Buy Neutral- ICBC 2.78 2.47 2.09 15.1 13.0 10.9 9.6 36.3% 16.1% 23.8% 13.8% 16,892 A Neutral- BOC 2.37 2.03 1.77 17.5 13.7 11.7 10.0 13.0% 27.2% 23.9% 17.4% 10,525 A A-share avg 2.91 2.60 2.12 18.48 14.87 12.61 10.81 32.9% 16.7% 25.6% 16.4% CB avg 3.54 3.20 2.32 24.1 22.1 16.6 13.2 57.5% 8.5% 35.8% 25.7% JSB avg 3.12 2.79 2.14 33.8 16.4 14.3 12.2 43.5% 15.5% 28.1% 16.8% SOB avg 2.71 2.34 1.97 15.3 13.2 11.2 9.6 30.1% 17.2% 24.8% 16.0% Source: BOCOM Int’l Download our reports from Bloomberg: BOCM〈enter〉 Page 9
  10. 10. China Banking Sector 31 March 2010 Investment Opportunities show up BOCOM International Contacts: 9/F, Man Yee Building, 68 Des Voeux Road (852) 2977 9155 (852) 2977 9181 Central, Hong Kong. (852) 3710 3369 (852) 2297 9480 (852) 2297 9853 (852) 2297 9839 (8610) 8518 4068-99 Main: (852) 3710 3328; Fax: (852) 3798 0133 www.bocomgroup.com Rating System Company Rating Buy: Expect more than 20% upside in 12 months LT Buy: Expect more than 20% upside but longer than 12 months Neutral: Expect low volatility Sell: Expect more than 20% downside in 12 months Sector Rating Outperform: Expect more than 10% upside in 12 months Market perform: Expect low volatility Underperform: Expect more than 10% downside in 12 months Analyst Certification The authors of this report, hereby declare that: (i) all of the views expressed in this report accurately reflect their personal views about any and all of the subject securities or issuers; and (ii) no part of any of their compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed in this report; (iii) no insider information/ non-public price-sensitive information in relation to the subject securities or issuers which may influence the recommendations were being received by the authors. The authors of this report further confirm that (i) neither they nor their respective associates (as defined in the Code of Conduct issued by the Hong Kong Securities and Futures Commission) have dealt in or traded in the stock(s) covered in this research report within 30 calendar days prior to the date of issue of the report; (ii)) neither they nor their respective associates serve as an officer of any of the Hong Kong listed companies covered in this report; and (iii) neither they nor their respective associates have any financial interests in the stock(s) covered in this report. Download our reports from Bloomberg: BOCM〈enter〉 Page 10
  11. 11. China Banking Sector 31 March 2010 Investment Opportunities show up Disclaimer By accepting this report (which includes any attachment hereto), the recipient hereof represents and warrants that he is entitled to receive such report in accordance with the restrictions set forth below and agrees to be bound by the limitations contained herein. Any failure to comply with these limitations may constitute a violation of law. This report is strictly confidential and is for private circulation only to clients of BOCOM International Securities Ltd. This report is being supplied to you strictly on the basis that it will remain confidential. No part of this report may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on, directly or indirectly, to any other person in whole or in part, for any purpose without the prior written consent of BOCOM International Securities Ltd. BOCOM International Securities Ltd, its affiliates and related companies, their directors, associates, connected parties and/or employees may own or have positions in securities of the company(ies) covered in this report or any securities related thereto and may from time to time add to or dispose of, or may be interested in, any such securities. Further, BOCOM International Securities Ltd, its affiliates and its related companies may do and seek to do business with the company(ies) covered in this report and may from time to time act as market maker or have assumed an underwriting commitment in securities of such company(ies), may sell them to or buy them from customers on a principal basis and may also perform or seek to perform investment banking, advisory, underwriting, financing or other services for or relating to such company(ies) as well as solicit such investment, advisory, financing or other services from any entity mentioned in this report. In reviewing this report, an investor should be aware that any or all of the foregoing, among other things, may give rise to real or potential conflicts of interest. The information contained in this report is prepared from data and sources believed to be correct and reliable at the time of issue of this report. This report does not purport to contain all the information that a prospective investor may require and may be subject to late delivery, interruption and interception. BOCOM International Securities Ltd does not make any guarantee, representation or warranty, express or implied, as to the adequacy, accuracy, completeness, reliability or fairness of any such information and opinion contained in this report and accordingly, neither BOCOM International Securities Ltd nor any of its affiliates nor its related persons shall not be liable in any manner whatsoever for any consequences (including but not limited to any direct, indirect or consequential losses, loss of profits and damages) of any reliance thereon or usage thereof. This report is general in nature and has been prepared for information purposes only. It is intended for circulation amongst BOCOM International Securities Ltd’s clients generally and does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. The information and opinions in this report are not and should not be construed or considered as an offer, recommendation or solicitation to buy or sell the subject securities, related investments or other financial instruments thereof. The views, recommendations, advice and opinions in this report may not necessarily reflect those of BOCOM International Securities Ltd or any of its affiliates, and are subject to change without notice. BOCOM International Securities Ltd has no obligation to update its opinion or the information in this report. Investors are advised to make their own independent evaluation of the information contained in this research report, consider their own individual investment objectives, financial situation and particular needs and consult their own professional and financial advisers as to the legal, business, financial, tax and other aspects before participating in any transaction in respect of the securities of company(ies) covered in this report. The securities of such company(ies) may not be eligible for sale in all jurisdictions or to all categories of investors. This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to any law, regulation, rule or other registration or licensing requirement. BOCOM International Securities. Ltd is a wholly owned subsidiary of Bank of Communications Co Ltd. Download our reports from Bloomberg: BOCM〈enter〉 Page 11

×