The Week That Was in ASEAN@Smartkarma - BCA's Transactional, ASSA & Anteraja, and Philippine Banks

CHIB: Better Capitalisation, Liquidity & Efficiency Offset Asset Quality Concerns

Global Bank Equity Specialist, Creative Portfolios

Paul Hollingworth

Global Bank Equity Specialist

Creative Portfolios

Equity Bottom-Up

China Banking Corporation dedicates itself to mainly corporate credit (79% of Loan book) and to a lesser extent consumer segments (20% of credit), backed by source of funding balanced by Savings-heavy CASA (62% of Deposits) and by time deposits (38%).Q121/20 results show strong fundamental trends. There were improvements in Profitability, in NIM/Spread, in Efficiency, in Capital Adequacy, in Liquidity, and in Provisioning. There was though some deep deterioration in headline Asset Quality, reflected by a sky-high rise in Loan Loss Provisions to counter the swelling of Recorded Investment of Impaired Loans and Impaired Loans, net of Reserves. The bottom-line was supported by firm “Core Income” growth, rooted in much lower Interest Expenses, combining with Margin and Efficiency gains, and with forceful expansion of non-core streams, which partially offset the aforementioned jump in LLPs which reduced Comprehensive Income growth to 50.4% YoY.A FV of 8%, a PBV of 0.62x, a Dividend Yield of 4.0%, an Earnings Yield of 21.4% and a Total Return Ratio of 3.1x are not unappealing. CHIB commands a top decile PH Score™ (10) which captures benign value-quality trends, including a supportive valuation variable. The VFM ranking is elevated too (top quartile globally) which encapsulates aforementioned fundamental momentum, valuation, and technicals.The Philippines trades on a healthy discount (27%) versus its historical CAPE average.The Banking Sector in the Philippines is less stressed by disruptive fintech developments than elsewhere at this juncture.

China Banking Corporation dedicates itself to mainly corporate credit (79% of Loan book) and to a lesser extent consumer segments (20% of credit), backed by source of funding balanced by Savings-heavy CASA (62% of Deposits) and by time deposits (38%).Q121/20 results show strong fundamental trends. There were improvements in Profitability, in NIM/Spread, in Efficiency, in Capital Adequacy, in Liquidity, and in Provisioning. There was though some deep deterioration in headline Asset Quality, reflected by a sky-high rise in Loan Loss Provisions to counter the swelling of Recorded Investment of Impaired Loans and Impaired Loans, net of Reserves. The bottom-line was supported by firm “Core Income” growth, rooted in much lower Interest Expenses, combining with Margin and Efficiency gains, and with forceful expansion of non-core streams, which partially offset the aforementioned jump in LLPs which reduced Comprehensive Income growth to 50.4% YoY.A FV of 8%, a PBV of 0.62x, a Dividend Yield of 4.0%, an Earnings Yield of 21.4% and a Total Return Ratio of 3.1x are not unappealing. CHIB commands a top decile PH Score™ (10) which captures benign value-quality trends, including a supportive valuation variable. The VFM ranking is elevated too (top quartile globally) which encapsulates aforementioned fundamental momentum, valuation, and technicals.The Philippines trades on a healthy discount (27%) versus its historical CAPE average.The Banking Sector in the Philippines is less stressed by disruptive fintech developments than elsewhere at this juncture.

CHIB: Trends Continue to Impress While Valuation Is Supportive