China Construction Bank: Not Strategically Dear

Global Bank Equity Specialist, Creative Portfolios

Paul Hollingworth

Global Bank Equity Specialist

Creative Portfolios

Equity Bottom-Up

China Construction Bank  / Equity Bottom-Up

At Q319,<a href="https://www.smartkarma.com/entities/china-construction-bank-corp" target="_blank" data-smartkarma-citation="entities:24567:1" rel="noopener">China Construction Bank (601939 CH)</a>  reported a PH Score™ of 6.9 which was better than ABC (4.9) but not quite as strong as BOC (7.1) and behind ICBC (7.9) and PSBC (8.8). Regarding our value-quality gauge, latest data present a stable trend profile, revealing benign trends in Capitalisation, in Asset Quality, in Provisioning, and in Efficiency though Margin and Profitability showed some erosion. The top-line continues to exhibit a lack of dynamism given low single-digit Balance Sheet expansion in US$ and Funding Cost pressures. High LLPs, evidence of lingering Asset Quality issues not captured by flat NPLs, crimped the bottom-line.Similar to the other SOEs, CCB is marked by its “utility” characteristics with a Dividend Yield of 5.5%. P/Book, FV, and Earnings Yield stand at 0.69x, 8%, and 18.9%, respectively. These are quite attractive metrics given the relatively low risk of the strategic franchise, its financial strength, and a forward-looking AI and AA proposition.CCB is committed to becoming a core comprehensive service provider for smart city development, in alignment with government strategic targets. In terms of technology, AI robots (in wealth management, for example), Intelligent Risk Management Platforms, Biometric verification plus a public and private “cloud ecosphere” are evolving. Big data is developing with data warehouse integrating internal and external data; with enterprise data management and application architecture; and via working platforms. CCB is wedded to IoT, blockchain as well as big data in industry chain finance, via internet-based "e Xin Tong", "e Xin Tong" and "e Qi Tong". The bank has a strategy of Mobile First, provision of internet-based smart financial services, booming WeChat banking, and integration of online banking services that combines transactions, sales, and customer service. Automation and “intelligence” is the bedrock of risk management: the key area today of what is a highly leveraged system. Here, CCB is integrating corporate and retail early warning systems and unifying the monitoring of different exposures. Management launched a “new generation” retail customer scorecard model, elevating the level of automation and “intelligence” of risk metrics. In addition, the bank is attaining greater recognition and control of fraud. Regarding the remote monitoring system, CCB is adapting to the fast development of information, network and big data technology, by building a monitoring system with unified plans, standards, software and hardware. Innovation moving forward will be the key to CCB’s fortunes.

At Q319,China Construction Bank (601939 CH)  reported a PH Score™ of 6.9 which was better than ABC (4.9) but not quite as strong as BOC (7.1) and behind ICBC (7.9) and PSBC (8.8). Regarding our value-quality gauge, latest data present a stable trend profile, revealing benign trends in Capitalisation, in Asset Quality, in Provisioning, and in Efficiency though Margin and Profitability showed some erosion. The top-line continues to exhibit a lack of dynamism given low single-digit Balance Sheet expansion in US$ and Funding Cost pressures. High LLPs, evidence of lingering Asset Quality issues not captured by flat NPLs, crimped the bottom-line.Similar to the other SOEs, CCB is marked by its “utility” characteristics with a Dividend Yield of 5.5%. P/Book, FV, and Earnings Yield stand at 0.69x, 8%, and 18.9%, respectively. These are quite attractive metrics given the relatively low risk of the strategic franchise, its financial strength, and a forward-looking AI and AA proposition.CCB is committed to becoming a core comprehensive service provider for smart city development, in alignment with government strategic targets. In terms of technology, AI robots (in wealth management, for example), Intelligent Risk Management Platforms, Biometric verification plus a public and private “cloud ecosphere” are evolving. Big data is developing with data warehouse integrating internal and external data; with enterprise data management and application architecture; and via working platforms. CCB is wedded to IoT, blockchain as well as big data in industry chain finance, via internet-based "e Xin Tong", "e Xin Tong" and "e Qi Tong". The bank has a strategy of Mobile First, provision of internet-based smart financial services, booming WeChat banking, and integration of online banking services that combines transactions, sales, and customer service. Automation and “intelligence” is the bedrock of risk management: the key area today of what is a highly leveraged system. Here, CCB is integrating corporate and retail early warning systems and unifying the monitoring of different exposures. Management launched a “new generation” retail customer scorecard model, elevating the level of automation and “intelligence” of risk metrics. In addition, the bank is attaining greater recognition and control of fraud. Regarding the remote monitoring system, CCB is adapting to the fast development of information, network and big data technology, by building a monitoring system with unified plans, standards, software and hardware. Innovation moving forward will be the key to CCB’s fortunes.

China Construction Bank

China Construction Bank: A Level Terrain