Chinese banks are still expected to deliver double-digit loan growth
Table 1: Most large developers do not breach the red lines
| Number of red lines violated | Colour code | Debt growth allowed per annum | % of developers* |
| Zero | Green | 15% | 57% |
| One | Yellow | 10% | 30% |
| Two | Orange | 5% | 6% |
| Three | Red | 0% | 7% |
Source:
Bloomberg Finance L.P., iFAST compilations *Based on MSCI China Real Estate index Data as of FY2020 or 1H21 reports |
|||
Chart 1: China banks can still expect double-digit loan growth for 2021
Big Four banks are well-capitalised to withstand Huarong shock
Chart 2: Huarong’s onshore and offshore bonds maturing this year
Table 2: Capital adequacy of the Big Four banks remain strong
| Company | CET1 Ratio | *Minimum CET1 ratio |
| Industrial and Commercial Bank of China (HKEX:1398) | 13.3% | 9.0% |
| China Construction Bank (HKEX:939) | 13.4% | 9.0% |
| Bank Of China (HKEX:3988) | 11.1% | 9.0% |
| Agricultural Bank Of China (HKEX:1288) | 11.0% | 8.5% |
Source:
Bloomberg Finance L.P., iFAST compilations *minimum requirement is based on CBRC requirement plus a capital
conservation buffer and a GSIB buffer Data as of 1Q21 reports |
||
New revenue streams represent potential catalysts in the longer term
Re-rating opportunity might get delayed but we still expect very attractive upside potential
Chart 3: Big Four banks trading at historical lows
Table 3: Immense upside potential in the long-run
| Company Name | PB ratio (X) | Target price (HKD) | Current price (HKD) | Upside Potential | Average dividend yield |
| Industrial and Commercial Bank of China (HKEX:1398) | 0.85 | 8.9 | 4.4 | 101.7% | 8.1% |
| China Construction Bank (HKEX:939) | 0.85 | 10.0 | 5.6 | 78.7% | 7.3% |
| Bank Of China (HKEX:3988) | 0.75 | 6.3 | 2.7 | 133.0% | 8.9% |
| Agricultural Bank Of China (HKEX:1288) | 0.75 | 5.7 | 2.6 | 118.1% | 9.2% |
| Average | 107.9% | 8.4% | |||
Source:
Bloomberg Finance L.P., iFAST estimations Data as of 13 August 2021 |
|||||
Declaration:
For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) holds a NIL position in the abovementioned securities. The analyst who produced this report holds a position in ChinaAMC Hong Kong Banks ETF (HKEX:3143).
All materials and contents found in this site are strictly for general circulation and informational purposes only and should not be considered as an offer, or solicitation, to deal in any of the funds or products found/identified in this site. While iFAST Financial Pte Ltd ("IFPL") has tried to provide accurate and timely information, there may be inadvertent delays, omissions, technical or factual inaccuracies and typographical errors. Any opinion or estimate contained in this report is made on a general basis and neither IFPL nor any of its servants or agents have given any consideration to nor have they or any of them made any investigation of the investment objective, financial situation or particular need of any user or reader, any specific person or group of persons. You should consider carefully if the products you are going to purchase are suitable for your investment objective, investment experience, risk tolerance and other personal circumstances. If you are uncertain about the suitability of the investment product, please seek advice from a financial adviser, before making a decision to purchase the investment product. Past performance is not indicative of future performance. The value of the investment products and the income from them may fall as well as rise. Opinions expressed herein are subject to change without notice. In respect of any matters arising from, or in connection with the said research analyses or research reports, recipients of the report are to contact IFPL at 10 Collyer Quay, #26-01 Ocean Financial Centre Building, Singapore 049315, or by telephone at +65 6557 2853. Where the report contains research analyses or research reports from a foreign research house and if the recipient of such research analyses or research reports is not an accredited investor, expert investor, institutional investor or an ex-accredited investor, IFPL accepts legal responsibility for the contents of such analyses or reports to such persons only to the extent as required by law. Please note that only certain security(ies) herein are available to all investors, while the rest are only available for certain persons to invest in, such as Accredited Investors (as defined in the Securities and Futures Act) or one who invests at least S$200,000 (or its equivalent currency) per transaction. To qualify as an Accredited Investor, one needs to submit a declaration form and certain relevant supporting documents, according to iFAST’s prevailing policies and procedures.
Please read our full disclaimers on the website at ( https://secure.fundsupermart.com/fsmone/policies/328125/investment-account-terms-&-conditions).
iFAST Financial Pte Ltd (IFPL) (registered address: 10 Collyer Quay #26-01 Ocean Financial Centre Singapore 049315, Telephone: 6557 2000) holds the Financial Advisers Licence issued by the Monetary Authority of Singapore ('MAS') to conduct regulated activities of advising on securities, marketing of collective investment schemes and arranging of any contract of insurance in respect of life policies, other than a contract of reinsurance and the Capital Markets Services Licence issued by the MAS to conduct regulated activities of dealing in securities and providing custodial services for securities. While IFPL has made every effort to ensure the independence of the report's contents, IFPL's nature of business is such that IFPL and its connected and associated entities together with their respective directors, officers and staff may be involved in providing dealing or investment-related services in the abovementioned securities, and have taken or may take positions in the securities mentioned in this report, and may also act as the principal for any buy or sell trades.