ICBC : Industrial and Commercial Bank of China (1398)

[Thriftville]

Tiggerbee, thanks for your input! The links are very useful

It's true that when economy slows, those banks may suffer a lower earning in short term. However, the share price is still obscenely cheap. They have so much growth prospect in future, especially international banking. I wouldn't consider BOC HK due to its limited business exposure in HK.

Hope to hear your views!

[Behappyalways]

Chinese banking: a Wild West in the Far East?
http://www.telegraph.co.uk/finance/newsb...-East.html

[pianist]

What the roe like?

[Thriftville]

The ROE is close to 20% for the past few years.

[Wildreamz]

Seems like a very good entering opportunity as of late.

But Bank of China (3988) seems like an even bigger bargain comparatively. It is also one of the Big 4 state owned banks in China. Trading at 0.9 P/B 6+% dividend (similar payout ratio as ICBC: 35%), and have debt to equity ratio (38%) much lower than ICBC (160%). NPL is on a similar level as ICBC (<1%).

Only ROE is lower in comparison (16-17% for past 3 years vs ICBC 20-21%) (see: http://www.aastocks.com/EN/Stock/Company...mbol=03988 vs http://www.aastocks.com/EN/Stock/Company...mbol=01398)

Only 20% of its revenue is from the more risky mortgage and personal loans.

The lower market cap also indicates more room for growth.

Any thoughts?

[CityFarmer]

Seems like a very good entering opportunity as of late.

But Bank of China (3988) seems like an even bigger bargain comparatively. It is also one of the Big 4 state owned banks in China. Trading at 0.9 P/B 6+% dividend (similar payout ratio as ICBC: 35%), and have debt to equity ratio (38%) much lower than ICBC (160%). NPL is on a similar level as ICBC (<1%).

Only ROE is lower in comparison (16-17% for past 3 years vs ICBC 20-21%) (see: http://www.aastocks.com/EN/Stock/Company...mbol=03988 vs http://www.aastocks.com/EN/Stock/Company...mbol=01398)

Only 20% of its revenue is from the more risky mortgage and personal loans.

The lower market cap also indicates more room for growth.

Any thoughts?

IMO, one of reasons holding up investors, is the NPL level. Official data is <1%, but was estimated as >5% generally for all major banks. After factor-in the new NPL, will the current valuation still appealing?

(not vested)

[Wildreamz]

IMO, one of reasons holding up investors, is the NPL level. Official data is <1%, but was estimated as >5% generally for all major banks. After factor-in the new NPL, will the current valuation still appealing?

(not vested)

Depends on how much more than 5%.

But I think the current valuation is so low that, it may still be appealing.

(bias since vested)

[Wildreamz]

Do you have the link to the source that states >5% NPL?

[CityFarmer]

Do you have the link to the source that states >5% NPL?

I am researching on China banks, and the 5% was on a number of analyst report I read. I didn't manage to retain the links

Coincidently, the "NPL" level of YZJ's lending investment was also about 5%, base on its AR.

IMO, the top two concerns on China bank are
- NPL level, since no reliable data available, only guesstimate
- Upcoming interest-rate liberalization, which will depress the interest income

[Wildreamz]

Chinese shadow banks face major test on 30th Jan 2014 where one of the "shadow banks" in China, will default, and ICBC will NOT bail investors out.

http://www.reuters.com/article/2014/01/1...MT20140116

I feel ICBC should NOT set the precedence of bailing out investors in these "WMP". This is the right decision that will steer the mindset of investors in the right direction: that high returns of these WMPs meant higher risks as well.

Even though, it MIGHT trigger a full blown crisis in China and the world when that happens.