Global Bank Equity Specialist, Creative Portfolios

Paul Hollingworth

Global Bank Equity Specialist

Creative Portfolios

Equity Bottom-Up

China Everbright Bank Co A / Equity Bottom-Up

In terms of fundamental progression and valuation, <a href="https://www.smartkarma.com/entities/china-everbright-bank-co-ltd-675cb9b4-f4fb-4317-9df7-75e3849a2f5a" target="_blank" rel="noopener" data-smartkarma-citation="entities:885:1">China Everbright Bank Co A (601818 CH)</a> shines. At Q219, the bank reported benign trends, including in Efficiency - the fulcrum to enhanced Profitability. As elsewhere in China, there are Asset Quality concerns and Capital Adequacy could be better but we believe you are being paid for the risk given the attractive valuation.A PH Score™ of 9.1 at Everbright reveals value-quality attributes - high by global standards. From time to time, we come across high PH scorers that fail the quality test after a more rigorous, granular, analysis such as <a href="https://www.smartkarma.com/entities/bank-of-tianjin-co-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:22648:1">Bank Of Tianjin (1578 HK)</a> <a href="https://www.smartkarma.com/entities/bank-of-hangzhou-co-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:27215:1">Bank of Hangzhou Co Ltd (600926 CH)</a> and <a href="https://www.smartkarma.com/entities/bank-of-nanjing-co-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:683:1">Bank Of Nanjing Co Ltd A (601009 CH)</a>  where risks arguably outweigh opportunity and "the glass is half empty". Despite being mindful of aforementioned risks -such as credit costs, common to China- we are encouraged by top-line growth, solid fee Income expansion, improving "jaws", and enhanced Liquidity at Everbright. This is a growth narrative with arguably less risk than elsewhere in China. Perhaps "the glass is half full".The bank has become a more balanced proposition, combining core Corporate Banking (such as bond underwriting, Trade Finance, and Corporate Finance) with Consumer Credit (mortgages and credit cards) as well as Financial Markets (custody, AM, settlements) - all within an integrated technological framework. CRI exposure is moderate and is lower than 5 years ago.Management commands a coherent digitalisation strategy based on Intelligent Banking with robust growth in corporate e-banking and mobile transactions. Business is booming in the cloud. Fintech prowess is driving already efficient operations. The bank structures itself according to a wealth management model.Shares trade on a Franchise Valuation of 7%, a P/Book of 0.7x, and an Earnings Yield of 16%. From a valuation stance, this hardly looks demanding.

In terms of fundamental progression and valuation, China Everbright Bank Co A (601818 CH) shines. At Q219, the bank reported benign trends, including in Efficiency - the fulcrum to enhanced Profitability. As elsewhere in China, there are Asset Quality concerns and Capital Adequacy could be better but we believe you are being paid for the risk given the attractive valuation.A PH Score™ of 9.1 at Everbright reveals value-quality attributes - high by global standards. From time to time, we come across high PH scorers that fail the quality test after a more rigorous, granular, analysis such as Bank Of Tianjin (1578 HK) Bank of Hangzhou Co Ltd (600926 CH) and Bank Of Nanjing Co Ltd A (601009 CH)  where risks arguably outweigh opportunity and "the glass is half empty". Despite being mindful of aforementioned risks -such as credit costs, common to China- we are encouraged by top-line growth, solid fee Income expansion, improving "jaws", and enhanced Liquidity at Everbright. This is a growth narrative with arguably less risk than elsewhere in China. Perhaps "the glass is half full".The bank has become a more balanced proposition, combining core Corporate Banking (such as bond underwriting, Trade Finance, and Corporate Finance) with Consumer Credit (mortgages and credit cards) as well as Financial Markets (custody, AM, settlements) - all within an integrated technological framework. CRI exposure is moderate and is lower than 5 years ago.Management commands a coherent digitalisation strategy based on Intelligent Banking with robust growth in corporate e-banking and mobile transactions. Business is booming in the cloud. Fintech prowess is driving already efficient operations. The bank structures itself according to a wealth management model.Shares trade on a Franchise Valuation of 7%, a P/Book of 0.7x, and an Earnings Yield of 16%. From a valuation stance, this hardly looks demanding.

China Everbright Bank: Life Can Never Give Security; It Can Only Promise Opportunity.