Company Reports

China's big four state-owned banks, Agricultural Bank of China, Bank of China, China Construction Bank, and the Industrial and Commercial Bank of China, posted interim revenue and profit growth of 9%-11% and 3%-5% year on year, respectively.

Bank of China is the country's fourth-largest bank by assets. Its respected brands, solid expertise in China's cross-border banking services, and cost advantages position it to benefit in the long term from China's increasing integration with the global economy.

China's big four state-owned banks, Agricultural Bank of China, Bank of China, China Construction Bank, and the Industrial and Commercial Bank of China, posted year-on-year first-quarter revenue and profit growth of 8%-11% and 4%-5%, respectively.

Bank of China is the country's fourth-largest bank by assets. Its respected brands, solid expertise in China's cross-border banking services, and cost advantages position it to benefit in the long term from China's increasing integration with the global economy.

Bank of China is the country's fourth-largest bank by assets. Its respected brands, solid expertise in China's cross-border banking services, and cost advantages position it to benefit in the long term from China's increasing integration with the global economy.

2025 revenue and profit growth for China's Big Four state-owned banks accelerated to 1.9%-4.5% and 0.7%-3.2%, respectively, from the first nine months.

Industrial and Commercial Bank of China held an Investor Day on Nov. 26, highlighting recent trends in net interest margin, or NIM, demand from corporate and inclusive finance sectors, and potential in the overseas banking segment.

Bank of China is the country's fourth-largest bank by assets. Its respected brands, solid expertise in China's cross-border banking services, and cost advantages position it to benefit in the long term from China's increasing integration with the global economy.

China's Big Four state-owned banks reported divergent September-quarter performances due to fee-based activities and asset mix. Year-to-September net profit recovered to growth of 0.3%-3% year on year, helped in part by lower provision expenses.

China's six state-owned enterprise banks reported first-half revenue growth of 0.8%-3.8% year on year, the best since 2022. Net profit performance diverged, ranging from a 1.4% decline to 2.7% growth, reflecting differences in loan-loss provisioning. Operating expenses were flat to slightly lower.

China will reinstate a 6% value-added tax on interest income from treasury bills, local government bonds, and financial institution notes issued after Aug. 8. These had been exempt since 2016.

We have updated our cost of equity assumption for Bank of China to reflect recent industry developments, including weaker-than-expected year-to-date loan growth, a modest May interest rate cut, and policies to curb pricing competition among banks.

Bank of China is the country's fourth-largest bank by assets. Its respected brands, solid expertise in China's cross-border banking services, and cost advantages position it to benefit in the long term from China's increasing integration with the global economy.

Industrial and Commercial Bank of China, China Construction Bank, Bank of China, and Postal Savings Bank of China reported first-quarter net profits that fell 2% to 4% year on year. Meanwhile, Agricultural Bank of China saw 2% growth.

We maintain our fair value estimates for Industrial and Commercial Bank of China, or ICBC, China Construction Bank, or CCB, Agricultural Bank of China, or ABC, and Postal Savings Bank of China, or PSBC, after they reported net profit growth in 2024 of 0.5%, 1.1%, 4.8%, and 0.3% respectively. ABC’s net profit growth exceeded our expectation by 1 percentage point, driven by industry-leading loan growth and strong investment gains. Other banks’ results are in line.

We maintain our fair value estimate of HKD 4 per share for Bank of China, or BOC. While 2024 revenue and earnings growth of 1.2% and 2.6%, respectively, pipped our projections of 0% and 1% growth, the better performance was primarily driven by larger-than-expected trading gains of 35% and decreasing tax rates. We see these as one-off factors. Following its share price gain of over 16% year to date, we believe BOC is relatively less attractive compared with its nationwide state-owned peers. From a valuation and outlook perspective, we prefer China Construction Bank. We expect BOC’s return on equity to decline to 8% by 2029 from 9.5% in 2024.

We raise our fair value estimates for select China banks after revisiting key model assumptions. Recent industry developments indicate improved prospects for net interest margins, or NIMs, and corporate credit quality. Our respective fair values for Industrial and Commercial Bank of China, or ICBC, China Construction Bank, or CCB, Agricultural Bank of China, or ABC, Bank of China, or BOC, China Merchants Bank, or CMB, and China Citic Bank, or CITIC, rise by 4% to 15%, to HKD 6.1, HKD 7.6, HKD 4.8, HKD 4, HKD 50, and HKD 6.2.

Bank of China is the country's fourth-largest bank by assets. Its respected brands, solid expertise in China's cross-border banking services, and cost advantages position it to benefit in the long term from China's increasing integration with the global economy.

We have raised our fair value estimates for some of China's SOE banks after third-quarter earnings. Our fair value estimate for Agricultural Bank of China, or ABC, rises 16% to HKD 4.4; for Industrial and Commercial Bank of China, or ICBC, by 8% to HKD 5.4; and for China Construction Bank, or CCB, by 10% to HKD 6.8. This adjustment reflects our reduction in credit cost assumptions by 2 basis points-8 basis points for 2024 and 2025 after China's recent economic stimulus package. Our FVEs for the other three SOE banks, namely Bank of China, or BOC; Bank of Communications, or BoCom; and Postal Savings Bank of China, or PSBC, are unchanged.

We maintain our fair value estimates for the state-owned enterprise banks in our coverage except for Agricultural Bank of China, which is seeing higher-than-expected net interest margins. We now increase ABC’s NIM assumption by 5 and 2 basis points in 2024 and 2025, respectively, which leads to a rise in fair value estimate to HKD 3.80 from HKD 3.50. Overall, there are no changes to our outlook for the other SOE banks.