ICBC : Industrial and Commercial Bank of China (1398)

A source from the Industrial and Commercial Bank of China's Yuncheng branch said the bank lent Highsee money so it could repay a previous debt. It was not clear when the loan was made or what amount was involved, but the bank has been unable to get the money back.

Officials in Shanxi Scramble to Sort out Steelmaker's Debt Mess
http://english.caixin.com/2014-04-15/100665507.html

The report is more on ICBC, so I post it here...

(not vested)

China’s big four banks’ profits surprise as reforms gather pace

HONG KONG – Industrial and Commercial Bank of China (ICBC) beat estimates with a near 7 per cent rise in first-quarter net profit, the fourth of China’s biggest lenders to show more resilient profits than expected as interest income held firm.

ICBC said net profit rose to 73.3 billion yuan (S$14.7 billion) in the first quarter, compared with an average estimate of 71.52 billion yuan calculated from a Thomson Reuters poll of 11 analysts.

Interest margins are expected to fall in the long run for Chinese banks, as the country’s regulators liberalise interest rates that guarantee a fat spread between the rate banks pay depositors and the rate at which they lend.

China’s central bank said on Tuesday it will speed up interest rate reforms and reiterated the urgency of establishing a deposit insurance system.

Further short-term pressure on interest margins comes from competition for depositors’ money from wealth management products and online funds, which are pushing savers into deposit products that are costlier for banks to provide.

“Internet finance is forcing commercial banks to reform. They need to develop a stronger online mentality, bring net technology into their operations and carry out further business model innovation,” said Mr Raymond Yung, financial services leader at PwC China in a statement ahead of the earnings season.

ICBC is the last of China’s top four banks to report earnings for the first quarter. Last week, Agricultural Bank of China, Bank of China and China Construction Bank all reported better-than-expected results as net interest margins held up in the face of rate reforms.

In the first quarter, banks resisted pressures on interest margins better than the market had expected, analysts said in research notes published after the earnings, by boosting returns from loans amid tight credit conditions in China.

Shares of the big four banks have fallen an average of 3 per cent in Hong Kong in the last five days, despite the better than expected results, suggesting investors are more focused on longer-term concerns about asset quality and interest margins. REUTERS
http://www.todayonline.com/business/chin...ather-pace

(03-04-2014, 04:40 PM)funman168 Wrote: I hv been thinking of accumulating this counter for long term(5-10yrs).

Positives
- cheap valuation
- strong institution support
- 6% dividend

Negative
- china banking sector opening up, increase competition
- unknown shadow banking impact

Plan to vest s$100-200k in it.
Any advice from the buddies out there? Thanks

ICBC is now at HKD 5.12
I hope you did invest.

Took profit few days ago and reinvested in another potential multi-bagger hehe

(03-06-2014, 12:30 PM)GFG Wrote:

(03-04-2014, 04:40 PM)funman168 Wrote: I hv been thinking of accumulating this counter for long term(5-10yrs).

Positives
- cheap valuation
- strong institution support
- 6% dividend

Negative
- china banking sector opening up, increase competition
- unknown shadow banking impact

Plan to vest s$100-200k in it.
Any advice from the buddies out there? Thanks

ICBC is now at HKD 5.12
I hope you did invest.

Some amateur thoughts on online MMF:
Online money market fund is probably going to have a major presence in China but the impact on Chinese banks’ deposits are probably going to be minimal. China’s total bank deposits stand roughly around RMB109 trillion in 1Q14 whilst the local money market funds have an AUM of less than RMB1 trillion (correct me if I’m wrong). Growth on these money market funds might be large but the absolute amount still pales in comparison to the total deposits these banks are holding. Moreover, ICBC holds roughly RMB14.6 trillion bank deposits (both corporate and retail) as at end Dec 2013. Despite having a capped deposit rate in China, I believe the Chinese population at large still prefers having to put money in a bank given the perception of stability and an implicit government guarantee on deposits. Online money market funds are generally susceptible to financial regulation (Singapore is a good example). If the government sees a huge threat to bank’s profitability, they might actually tighten regulation on these non-bank funds.

On ICBC:
ICBC is probably one of the better well-capitalized bank with CAR at 13.1%. Their NIM would probably tighten going forward given high competitive lending rates. However, ICBC still has ample liquidity to ramp up their lending organically (LTD ratio stands at 66.2%, which has a wide margin against a cap of 75%) and they have an adequate cash reserve to meet liquidity needs.

On a separate issue, I’m just wondering what much discount to par value would China Huarong buy these NPL assets off ICBC? Thanks for any inputs!

(Not vested and opinion does not constitute an investment recommendation)

-------------------------------------------------------------------------
Finding Value in a Speculative World!
http://www.valueinvestasia.com/

China must allow bad loans to fail for the good of its economy
http://www.scmp.com/comment/article/1544...ts-economy

http://investideas.net/forum/viewtopic.p...7&start=60

(07-07-2014, 06:34 PM)weilieh Wrote: Some amateur thoughts on online MMF:
Online money market fund is probably going to have a major presence in China but the impact on Chinese banks’ deposits are probably going to be minimal. China’s total bank deposits stand roughly around RMB109 trillion in 1Q14 whilst the local money market funds have an AUM of less than RMB1 trillion (correct me if I’m wrong). Growth on these money market funds might be large but the absolute amount still pales in comparison to the total deposits these banks are holding. Moreover, ICBC holds roughly RMB14.6 trillion bank deposits (both corporate and retail) as at end Dec 2013. Despite having a capped deposit rate in China, I believe the Chinese population at large still prefers having to put money in a bank given the perception of stability and an implicit government guarantee on deposits. Online money market funds are generally susceptible to financial regulation (Singapore is a good example). If the government sees a huge threat to bank’s profitability, they might actually tighten regulation on these non-bank funds.

On ICBC:
ICBC is probably one of the better well-capitalized bank with CAR at 13.1%. Their NIM would probably tighten going forward given high competitive lending rates. However, ICBC still has ample liquidity to ramp up their lending organically (LTD ratio stands at 66.2%, which has a wide margin against a cap of 75%) and they have an adequate cash reserve to meet liquidity needs.

On a separate issue, I’m just wondering what much discount to par value would China Huarong buy these NPL assets off ICBC? Thanks for any inputs!

(Not vested and opinion does not constitute an investment recommendation)

-------------------------------------------------------------------------
Finding Value in a Speculative World!
http://www.valueinvestasia.com/

ICBC 's NIM actually increased in the recent FY14Q2 results
Profit is also higher than analysts estimates
The share price took a hit though, as investors are focussed on the increased NPL ratio, now ard 0.99%
I still think this is an undervalued company with too much emphasis on the NPL ratio

I remember WB said the spread between the cost of capital and the interest rates the bank charges for loans (aka the NIM) is the key to profitability. He said this in the midst of the crisis with regard to Wells Fargo

At 0.99%, the NPL is still a fraction of its peers.
In any case, as u increase the loan quantum, naturally the NPL ratio increases as well

(Still vested @ HKD 4.74)

U increase loan quantum the NPL tends to increase, but not the NPL ratio

I think the chinese govt stance had been made clear in the last year of wen/ Hu admin. They are making too much and thats one reason why the financial deregulation presumably is accelerated. IMHO the govt will tighten regulation on these non bank funds because it will pose a systemic risk, and Xi/Li admin is much more proactive than their predecessor.

The NPL ratio does increase too, because as u chase more loanees, inevitably you have to consider those with lower credit profile
Esp if the loans granted by ICBC is growing at a rate higher than the total loans in the economy

I post the news article here, since it might be more relevant here.

With the slower growth, the sector that badly affected is the manufacturing, especially those for export, as stated in the news article

Will the new focus on healthcare, food, and IT helps? May be since most are base on domestic demands...

(not vested in any China bank)

China banks seek new lending horizons as bad debts rise
01 Sep 2014 06:50
[SHANGHAI] Grappling with a slowing economy, China's biggest banks are turning their back on mainstay borrowers like manufacturers and courting high growth industries such as healthcare, food and IT in a bid to boost revenue.

The shift in focus by the state-owned lenders coincides with a spike in non-performing loans and slower profit growth as China's vast factory sector flounders.

For the first half of this year, the banks reported an increase in bad loans from the Yangtze delta, the country's main export-focused manufacturing belt, as well as the Bohai industrial rim.

China's biggest bank, the Industrial and Commercial Bank of China , also said 80 per cent of new non-performing loans in the second quarter came from manufacturing and wholesale.

Several lenders said they expect bad loans to continue rising this year, especially from creditors in the steel, wholesale and shipping sectors. The Agricultural Bank of China , for example, said it had cut loans to customers in steel making and ship building by almost 39 billion yuan (US$6.4 billion).

Loan officers at several banks told Reuters they were no longer working on sectors like shipping and commodities, focusing instead on high-growth areas like health and technology.

Other bankers said they would look to generate more revenue from asset management, trust lending and financial leasing.
...
Source: Business Times Breaking News