China’s big banks, after record write-offs, poised for recovery _ jakarta globe
“The large banks are more protected on the downside and their valuations are relatively attractive,” said Hou, who has an outperform ranking on ICBC, CCB and Bank of China .
“Buy” and “strong buy” recommendations of analysts on more than 20 Chinese banks have risen to 171 now from 153 six months back. Database developer salary In contrast, “sell” and “strong sell” recommendations were at 56, up slightly from 51 over the same period, Thomson Reuters Starmine data shows.
Healthier banks are vital for China as the world’s second-largest economy navigates a slowdown and attempts to halt a rapid build-up of debt.
Data recovery agent For the banks, higher share prices would make it easier for any fund-raising ahead of new global capital rules coming into force in the years ahead.
Some recent economic data in China has bolstered the case for investor optimism. Data recovery usb flash drive Producer prices inflated by a stronger-than-expected 5.5 percent for December, its fastest increase since September 2011. Data recovery windows That is positive for state-owned enterprises, which have been wrestling with falling prices and borrow heavily from the largest banks.
China’s five biggest listed banks currently trade at an average 0.79 times book value, as investors have discounted for the costs of non-performing loans (NPLs) and subdued profitability. Database definition The steep price-to-book discount compares to the banks’ five-year average of 1.0.
The numbers last year did look quite bad. Data recovery definition Write-offs for just the first half of 2016 amounted to 220.8 billion yuan ($32.03 billion) for the top 23 banks listed in Hong Kong and Shanghai for which statistics are available, according to Reuters calculations. Database or database In 2015, bad loan disposals at those banks amounted to 353.2 billion yuan.
Net interest margin (NIM), the difference between interest earned on loans and that paid out to depositors, shrank between 30 and 40 basis points across the banking sector in 2016, squeezing profits.
The lenders have also begun a major restructuring of corporate debt. Data recovery software windows Since October, state lenders led by CCB and ICBC have announced debt-for-equity swap agreements totaling more than 300 billion yuan with big state-owned groups, mainly coal, energy and steel firms.
“The risks priced on the Chinese banks are somewhat overplayed, and combined with some of the highest savings rates in the world, there may be tactical opportunity,” said Stephen Corry, chief investment strategist at LGT Bank in Hong Kong.
Not all banks are set to benefit. Cost of data recovery For some of the country’s mid-tier and city commercial lenders, which have expanded their balance sheet by borrowing funds and through the issuance of wealth management products, tightening liquidity and Beijing’s crackdown on excessive risks in the financial sector are likely to hurt.
Bank of Communications (BoCom) and China Minsheng Banking Corp already are feeling the impact of margin compression and are expected to report that lending margins fell below 2 percent for the first time last year, according to Bernstein research.
“The valuation gap between leading banks and laggards could widen,” Lucy Feng, UBS’s banking analyst, wrote in a Jan. Database first entity framework 5 report. Data recovery iphone 5 “Banks with strong capital and less risky exposure could be the major outperformers.”