We used common sized analysis, CAMELS framework and Du Pont analysis to analyze financial statements of Bank of Communications, a state owned bank and a fortune 500 company in China. As financial statements of banks are different from that of a manufacturing company, analysis techniques are used in a different manner as well.

1. Financial Statements Analysis of Bank of
Communications
15th May 2020

2. CONTENT
1. Background introduction and accounting analysis By Katharine
2. Financial analysis: CAMELS Framework By Prem
3. Comprehensive analysis: DuPont analysis and ROE analysis By Monica
4. Top Chinese state-owned banks comparison By Carson

3. Background introduction
and accounting analysis
B y K a t h a r i n e

4. 03
Business is the human
activity related to material
things. It is necessary for
civilization.
Business is the human
activity related to material
things. It is necessary for
civilization.
Founded in 1908
Founded in 1908
April 1987
reopened after
reorganization with Head
Office located in Shanghai
June 2005
BoCom was listed
on the Hong Kong
Stock Exchange
May 2007
BoCom was listed on
the Shanghai Stock
Exchange
2015
The State Council approved
BoCom’s Plan to Deepened
Reformation
2019
The focus was on building strong
wealth management capabilities
SM 19204201 周燕 Katharine Group 5

5. 03
Business is the human
activity related to material
things. It is necessary for
civilization.
Business is the human
activity related to material
things. It is necessary for
civilization.
Founded in 1908
SM 19204201 周燕 Katharine Group 5
commerci
al
banking
offshore
finance
fund
trust
financial
leasing
insurance
overseas
securities
debt-to-
equity
swap
asset
managem
ent
BoCom Business Scope

6. 03
Business is the human
activity related to material
things. It is necessary for
civilization.
Business is the human
activity related to material
things. It is necessary for
civilization.
Founded in 1908
SM 19204201 周燕 Katharine Group 5
BoCom Ranked No.
150 in Fortune 500
in 2019

7. Common sized analysis on income statement(contd)
SM 19204201 周燕 Katharine Group 5

8. Common sized analysis on income statement
SM 19204201 周燕 Katharine Group 5
Analysis results:
1. Net profit of the bank has been
increasing over the years
2. Two major sources of income
3. Expenses

9. Common sized analysis
on balance sheet(contd)
SM 19204201 周燕 Katharine Group 5
all the items of balance sheets
are divided by total assets

10. Common sized analysis
on balance sheet
SM 19204201 周燕 Katharine Group 5

11. Scale indicators(contd)
SM 19204201 周燕 Katharine Group 5

12. Scale indicators
SM 19204201 周燕 Katharine Group 5

13. Financial health
analysis of Bank of
Communication
through
CAMELS Framework
-By Prem Thapamagar

14. SL 19204011 Prem Thapamagar Group 5
CAMELS analysis?

15. SL 19204011 Prem Thapamagar Group 5
CAMELS analysis
Framework used to evaluate the
financial condition of banks
Based on 6 perspectives:
C: Capital Adequacy
A: Asset Quality
M: Management Soundness
E: Earnings Capacity
L: Liquidity
S: Sensitivity to market conditions

16. SL 19204011 Prem Thapamagar Group 5
C: Capital Adequacy
• Measure of bank’s overall
financial condition and ability to
counter unanticipated shocks
• CBIRC has set the minimum CAR
requirement: 8%
• Rules for risk weighting are as
per the Basel III agreements

17. SL 19204011 Prem Thapamagar Group 5
A: Asset Quality
• a measure of components of
non-performing assets in
total assets
• A Non-performing loan is a
loan that is in default or close
to being in default

18. SL 19204011 Prem Thapamagar Group 5
M: Management soundness
• A measure of effectiveness
and efficiency of management
• Other indicators: revenue per
employee, profit per employee

19. SL 19204011 Prem Thapamagar Group 5
E: Earnings capacity
 Major indicators:
• Return on Equity
• Return on Assets
• Net profit margin
• Operating profit margin

20. SL 19204011 Prem Thapamagar Group 5
L: Liquidity
 Measure of the ability of the
bank to convert its assets
into cash without losing its
value.
 Asset-liability mismatches in
maturity may result in
solvency

21. SL 19204011 Prem Thapamagar Group 5
S: Sensitivity to market
conditions
 Measures sensitivity of bank
to different macroeconomic
indicators like interest rate
fluctuations, foreign currency
rate changes, credit risks.

22. Comprehensive analysis:
DuPont and ROE analysis
By Monica

23. DuPont analysis -ROE
• Deductive approach
• Discover which entry is impacting the result
• Some recommendations to improve its
performance
S L 1 9 2 0 4 0 2 0 M o n i c a M a y o r g a . G r o u p 5

24. BOCM performance 2017-2019
10.80%
10.74%
10.37%
10.10%
10.20%
10.30%
10.40%
10.50%
10.60%
10.70%
10.80%
10.90%
2017 2018 2019
ROE
ROE
S L 1 9 2 0 4 0 2 0 M o n i c a M a y o r g a . G r o u p 5

25. DETAILED ANALYSIS
Entry 2017 2018 2019
Var 2017-
2018
Var 2018-
2019
Net Income
Sales
NET PROFIT MARGIN
70,691
390,181
18.12%
74,165
434,447
17.07%
78,062
460,271
16.96%
4.91%
11.34%
(1.05)
5.25%
5.94%
(0.11)
Sales
Assets
ASSET TURNOVER
390,181
8,720,710
0.045
434,447
9,284,713
0.047
460,271
9,718,386
0.047
11.34%
6.47%
0.002
5.94%
4.67%
0.0006
Assets
Equity
EQUITY MULTIPLIER
8,720,710
654,339
13.33
9,284,713
690,790
13.44
9,718,386
753,110
12.90
6.47%
5.57%
0.11
4.67%
9.02%
(0.54)
ROE 10.80% 10.74% 10.37% (0.06) (0.37)
S L 1 9 2 0 4 0 2 0 M o n i c a M a y o r g a . G r o u p 5

26. 2017 2018 2019
Var
17-18
Var
18-19
0.81% 0.80% 0.80% (0.012) 0.0044
ROA
S L 1 9 2 0 4 0 2 0 M o n i c a M a y o r g a . G r o u p 5
2017 2018 2019
Var
17-18
Var
18-19
10.80% 10.74% 10.37% (0.06) (0.37)
ROE
2017 2018 2019
Var
17-18
Var
18-19
13.33 13.44 12.90 0.82% (4.02)
EQUITY MULTIPLIER
ROE DISAGGREGATION
(Net profit margin X Asset turnover)
X

27. 2017 2018 2019
Var
17-18
Var
18-19
0.81% 0.80% 0.80% (0.012) 0.0044
ROA
S L 1 9 2 0 4 0 2 0 M o n i c a M a y o r g a . G r o u p 5
2017 2018 2019
Var
17-18
Var
18-19
18.12% 17.07% 16.96% (1.05) (0.11)
NET PROFIT MARGIN
2017 2018 2019
Var
17-18
Var
18-19
0.045 0.047 0.047 4.6% 1.22%
ASSET TURNOVER
RETURN ON ASSETS - ROA
X

28. 2017 2018 2019
Var
17-18
Var
18-19
70,691 74,165 78,062 4.91% 5.25%
NET PROFIT
S L 1 9 2 0 4 0 2 0 M o n i c a M a y o r g a . G r o u p 5
2017 2018 2019
Var
17-18
Var
18-19
18.12% 17.07% 16.96% (1.05) (0.11)
NET PROFIT MARGIN
2017 2018 2019
Var
17-18
Var
18-19
390,181 434,447 460,271 11.34% 5.94%
INCOMES
1. NET PROFIT MARGIN
÷

29. S L 1 9 2 0 4 0 2 0 M o n i c a M a y o r g a . G r o u p 5
2017 2018 2019
Var
17-18
Var
18-19
390,181 434,447 460,271 11.34% 5.94%
INCOMES
2. TOTAL ASSET TURNOVER
2017 2018 2019
Var
17-18
Var
18-19
8,720,710 9,284,713 9,718,386 6.46% 4.67%
ASSETS
2017 2018 2019
Var
17-18
Var
18-19
0.045 0.047 0.047 4.6% 1.22%
ASSET TURNOVER
÷

30. S L 1 9 2 0 4 0 2 0 M o n i c a M a y o r g a . G r o u p 5
2017 2018 2019
Var
17-18
Var
18-19
13.33 13.44 12.90 0.85% (4%)
EQUITY MULTIPLIER
3. EQUITY MULTIPLIER
2017 2018 2019
Var
17-18
Var
18-19
8,720,710 9,284,713 9,718,386 6.46% 4.67%
ASSETS
2017 2018 2019
Var
17-18
Var
18-19
654,339 690,790 753,110 5.57% 9.02%
EQUITY
÷
2017 2018 2019
Var
17-18
Var
18-19
8,361,983 8,825,863 9,104,688 5.55% 3.16%
LIABILITIES

31. SUMMARY
ROE
ROE has slightly
decreased during the
last three years mainly
influenced by the
equity multiplier
ROA
ROA has slightly decreased
between 2017 and 2018
influenced by the decrease
of Net profit margin that
was affected due to the
greater increase in income
than net profit
EQUITY MULTIPLIER
Even though assets
and equity has
increased, equity
shows a greater
increase and thus a
decrease in this ratio
S L 1 9 2 0 4 0 2 0 M o n i c a M a y o r g a . G r o u p 5
ASSET UTILIZATION
Asset turn over has
kept almost constant
during the last three
years

32. Top Chinese state-owned
b a n k s c o m p a r i s o n
By Carson

33. Total assets
The more it grows, the larger it gets.
1. Net interest margin
The decline in net interest margin affects pre-
provision profit
2. Non-performing loans
The non-performing loans provision coverage affects
the post-provision profit.
Earning Capacity
S M 1 9 2 0 4 0 2 3 C a r s o n . G r o u p 5

34. Earning Capacity Total
Asset
(2013)
Total
Asset(20
19)
Net
Profit
(2013)
Net
Profit
(2019)
ROA
(2013)
ROA
(2019)
ICBC 18.92 30.11 262.649 312.224 1.39% 1.04%
CCB 15.36 25.44 214.657 266.733 1.40% 1.05%
ABC 14.56 24.88 166.315 212.098 1.14% 0.85%
BOC 13.87 22.77 156.911 187.405 1.13% 0.82%
PSBC 5.57 10.22 29.668 60.933 0.53% 0.60%
CMB 4.02 7.42 51.743 1.29% 1.25%
Growth in
6 years
Growth in
6 years
59.14% 18.88%
65.63% 24.26%
70.88% 27.53%
64.17% 19.43%
83.48%
84.58% 79.48%
105.38%
BOCM 5.56 9.91 78.24% 62.295 77.181 23.90% 1.12% 0.78%
92.867
Unit: Trillion Billion
ROA=Net Profit / Total Asset
ROE=ROA * EM (equity multiplier) or ROE=ROA *L (Leverage Ratio)
Net
Interest
Margin
(2013)
Net
Interest
Margin
(2019)
ICBC 2.57% 2.24%
CCB 2.74% 2.26%
ABC 2.79% 2.17%
BOC 2.24% 1.84%
PSBC 2.67% 2.50%
CMB 2.82% 2.59%
Growth in
6 years
-0.33%
-0.48%
-0.62%
-0.40%
-0.17%
-0.23%
BOCM 2.52% 1.58% -0.94%
Year
(2019)
Interest
Return
on
Interest
-bearing
Asset
NIS NIM
ICBC 1.76% 3.84% 2.08%
CCB 1.76% 3.88% 2.12%
ABC 1.80% 3.83% 2.03%
BOC 1.93% 3.65% 1.72%
1.59% 4.04% 2.45%
CMB 1.90% 4.38% 2.48%
Year
(2018)
Interest
Return
on
Interest
-bearing
Asset
NIS NIM
ICBC 1.65% 3.81% 2.16%
CCB 1.64% 3.82% 2.18%
ABC 1.62% 3.82% 2.20%
BOC 1.85% 3.64% 1.79%
CMB 1.90% 4.34% 2.44%
-
bearing
Liability Cost
Ratio
-
bearing
Liability Cost
Ratio
2.24%
2.26%
2.17%
1.84%
2.50%
2.59%
2.30%
2.31%
2.33%
1.90%
2.57%
PSBC
BOCM 2.56% 4.04% 1.48% 1.58%
BOCM 2.62% 4.01% 1.39% 1.51%
NPL Provision coverage
2019 2018 2017 2016 2015 2014 2013
ICBC 2.85% 2.67% 2.39% 2.21% 2.35% 2.34% 2.42%
CCB 3.23% 3.04% 2.55% 2.29% 2.39% 2.65% 2.66%
ABC 4.04% 4.01% 3.77% 4.11% 4.53% 4.41% 4.48%
BOC 2.51% 2.58% 2.31% 2.38% 2.19% 2.21% 2.20%
3.35% 2.98% 2.44% 2.36% 2.39% 2.33% 1.95%
CMB 4.95% 4.87% 4.22% 3.37% 3.01% 2.59% 2.21%
PSBC
BOCM 2.53% 2.58% 2.30% 2.29% 2.35% 2.24% 2.24%
Total assets
The more it grows, the larger it gets.
1. Net interest margin
The decline in net interest margin affects pre-
provision profit
2. Non-performing loans
The non-performing loans provision coverage affects
the post-provision profit.
S M 1 9 2 0 4 0 2 3 C a r s o n . G r o u p 5

35. The size of capital and total assets
1. Capital adequacy ratio and money supply
Internal and external factors affecting the growth of
commercial banks
2. Return on risk-weighted assets（RORWA）
A bank using the same unit of risk assets to obtain a higher
net profit means that the bank can supplement core tier 1
capital adequacy ratio faster.
3. Non-interest income
A simple understanding of the so-called asset-light
business is a business that does not increase risk-weighted
assets but can increase net profit. Therefore, non-interest
income is an important means to improve the risk-
weighted return on assets of banks.
Company Growth Ability
S M 1 9 2 0 4 0 2 3 C a r s o n . G r o u p 5

36. Company Growth Ability
Net core
tier 1
capital
(2019)
Net core
tier 1
capital
(2018)
The core
capital
adequacy
ratio
(2019)
The core
capital
adequacy
ratio (2018)
Risk-
weighted
assets
(2019)
Risk-
weighted
assets
(2018)
Total Assets
(2019)
Total
Assets
(2018)
ICBC 24727.74 22320.33 13.28% 12.98% 186168.86 171909.92 301094.36 276995.40
CCB 20899.76 18893.9 13.88% 13.83% 150532.91 136594.97 254362.61 232226.93
ABC 17405.84 15839.27 11.24% 11.55% 154853.52 137128.94 248782.88 226094.71
BOC 16205.63 14880.1 11.47% 11.59% 141239.15 128415.26 227697.44 212672.75
4922.12 4216.78 9.90% 9.77% 49696.58 43162.19 102167.06 95162.11
6894.89 6348.07 11.22% 11.16% 61444.59 56905.42 99056.00 95311.71
5503.39 4823.4 11.95% 11.78% 46067.86 40928.90 74172.40 67457.29
G G G G
G
rowth
ate(1)
rowth
ate(2)
rowth
ate(3)
rowth
ate(4)
rowth
ate(1)-
Growth
Rate(3)
R R R R
R
10.79% 2.31% 8.29% 8.70% 2.49%
10.62% 0.36% 10.20% 9.53% 0.41%
9.89% 12.93% 10.03% -3.04%
8.91% 9.99% 7.06% -1.08%
16.73% 1.33% 15.14% 7.36% 1.59%
8.61% 0.54% 7.98% 3.93% 0.64%
14.10% 1.44% 12.56% 9.95% 1.54%
-2.68%
-1.04%
PSBC
CMB
BOCM
Risk-
weighted
assets
(2019)/
Total Assets
(2019)
Risk-
weighted
assets
(2018)/
Total
Assets
(2018)
ICBC 61.83% 62.06%
CCB 59.18% 58.82%
ABC 62.24% 60.65%
BOC 62.03% 60.38%
48.64% 45.36%
62.11% 60.67%
Growth
ateR
-0.37%
0.61%
2.63%
2.73%
7.24%
2.37%
PSBC
CMB
BOCM 62.03% 59.70% 3.90%
ROE ROA EM
ICBC 13.05% 1.04% 12.59
CCB 13.18% 1.05% 12.57
ABC 12.43% 0.85% 14.58
BOC 11.45% 0.82% 13.91
13.10% 0.60% 21.97
16.84% 1.25% 13.46
RORWA
attributed
to parent
company
RORWA
1.68% 1.75%
1.77% 1.88%
1.37% 1.46%
1.33% 1.50%
1.23% 1.31%
2.02% 2.15%
PSBC
CMB
BOCM 11.20% 0.78% 14.38 1.26% 1.32%
Operating
income
The cost/
income
ratio
Net
interest
income
Non-interest
income
NIIR
Non-interest
income / Net
asset
Net fee and
commission
income
Net fee and
commission
income / Net
asset
Net fee and
commission
income /
Total income
Operation and
administrative
expense
ICBC 8551.64 25.79% 6069.26 2482.38 29.03% 10.05% 1556.00 6.30% 18.20% 1990.5
CCB 7056.29 26.53% 5106.80 1949.49 27.63% 9.29% 1372.84 6.54% 19.46% 1795.31
ABC 6272.68 30.49% 4868.71 1403.97 22.38% 8.02% 869.26 4.97% 13.86% 1912.24
BOC 5491.82 28.00% 3742.50 1749.32 31.85% 10.59% 896.12 5.43% 16.32% 1537.82
PSBC 2768.09 56.57% 2402.24 365.85 13.22% 7.38% 170.85 3.45% 6.17% 1565.99
BOCM 2324.72 30.11% 1440.83 883.89 38.02% 12.74% 436.25 6.29% 18.77% 665.60
CMB 2697.03 32.09% 1730.90 966.13 35.82% 16.74% 714.93 12.38% 26.51% 865.41
The size of capital and total assets
1. Capital adequacy ratio and money supply
Internal and external factors affecting the growth of
commercial banks
2. Return on risk-weighted assets（RORWA）
A bank using the same unit of risk assets to obtain a higher
net profit means that the bank can supplement core tier 1
capital adequacy ratio faster.
3. Non-interest income
A simple understanding of the so-called asset-light
business is a business that does not increase risk-weighted
assets but can increase net profit. Therefore, non-interest
income is an important means to improve the risk-
weighted return on assets of banks.
S M 1 9 2 0 4 0 2 3 C a r s o n . G r o u p 5

37. THANKS FOR WATCHING!!
For full report on the analysis, you may contact me:
LinkedIn: https://www.linkedin.com/in/premhere01
Email: prem.here01@outlook.com