Global Bank Equity Specialist, Creative Portfolios

Paul Hollingworth

Global Bank Equity Specialist

Creative Portfolios

Quantitative Analysis

<p><a href="https://www.smartkarma.com/entities/ind-comm-bk-of-china-h" target="_blank" data-smartkarma-citation="entities:1119:1" rel="noopener">ICBC (H) (1398 HK)</a> reported a solid set of numbers at Q319 with modest gains in Efficiency and enhanced Capital Adequacy as positive standouts. Trends were broadly constructive though we note, as with ABC, some Funding Cost pressure which crimped Net Interest Income, while Asset Writedowns (mostly LLPs) exerted a downward impact on the bottom-line and on Profitability despite a decline in the NPL ratio. A rise in Provisioning indicates that lingering Asset Quality issues have not diminished. The top-line exhibited somewhat tepid characteristics though was supported by matched mid single-digit expansion of credit and deposits.</p><p>Valuations remain pretty reasonable. Total Return Ratio stands at 2.5x. Earnings and Dividend Yields of 17.3% and 5.1%, respectively, catch the eye. P/Book and FV of 0.74x and 9% are not prohibitively high.</p><div class="content-highlight"><p>The PH Score of 7.9 may provide a moderate tailwind for the shares. Fundamental trends are quite constructive with improvements in Efficiency, in Capital Adequacy, in Asset Quality and in Provisioning with stable Profitability and Liquidity and slight Margin erosion. The low valuation variable adds to the overall value-quality gauge. We conclude that a steady-state profile with relatively strong financial strength readings (along with CCB and Ningbo) combined with constructive trends overall (though not Profitability) does not detract from an attractive valuation. Given the bank’s income merits, investment looks like a relatively low risk coupon-clipping opportunity.</p></div>

ICBC (H) (1398 HK) reported a solid set of numbers at Q319 with modest gains in Efficiency and enhanced Capital Adequacy as positive standouts. Trends were broadly constructive though we note, as with ABC, some Funding Cost pressure which crimped Net Interest Income, while Asset Writedowns (mostly LLPs) exerted a downward impact on the bottom-line and on Profitability despite a decline in the NPL ratio. A rise in Provisioning indicates that lingering Asset Quality issues have not diminished. The top-line exhibited somewhat tepid characteristics though was supported by matched mid single-digit expansion of credit and deposits.Valuations remain pretty reasonable. Total Return Ratio stands at 2.5x. Earnings and Dividend Yields of 17.3% and 5.1%, respectively, catch the eye. P/Book and FV of 0.74x and 9% are not prohibitively high.The PH Score of 7.9 may provide a moderate tailwind for the shares. Fundamental trends are quite constructive with improvements in Efficiency, in Capital Adequacy, in Asset Quality and in Provisioning with stable Profitability and Liquidity and slight Margin erosion. The low valuation variable adds to the overall value-quality gauge. We conclude that a steady-state profile with relatively strong financial strength readings (along with CCB and Ningbo) combined with constructive trends overall (though not Profitability) does not detract from an attractive valuation. Given the bank’s income merits, investment looks like a relatively low risk coupon-clipping opportunity.

ICBC: Steady-State