七线谱:四大天王( China Big Four Banks)
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| image credit to sohu.com.cn |
The "big
four" state-owned
commercial banks are the Bank
of China, the China Construction Bank, the Industrial and Commercial Bank of China, and the Agricultural Bank of China, all of which are also among the largest banks in the world as of 2018.
The big four
also, the world largest in term of total assets base on 2018 S&P Global Market Intelligence report. FYI, DBS rank 71st with a total asset of approx. USD$388 Billion.
<Source: Wikipedia.com>
“In December 2017, the International Monetary Fund published the results
of a stress test, which looked at the performance of China’s banking sector. It
found that 27 out of the 33 Chinese banks it assessed would not meet capital
requirements in the event of a major shock. The six banks that did meet the
requirements included all of China’s big four banks – ICBC, Agricultural Bank
of China, China Construction Bank, and Bank of China.”
Numerous report or analysis on problems faced by Chinese banking,
ranging from bad debts, asset quality, liquidity and capital adequacy.
Bad
loans in China’s banking system mount, rise 3.6 per cent in the second quarter <source:scmp.com>
Chinese
banks have reported an increase in bad debts and a decline in capital adequacy
ratio in the second quarter, as the year-long trade war has hit the country’s
economy hard.
Total non-performing loans in the
mainland’s banking system rose to 2.235 trillion yuan (US$316.6 billion) during
the three months to June, up 78.1 billion yuan, or 3.6 per cent from the first
quarter of this year. The non-performing loan ratio edged up by a marginal 0.01
percentage points to 1.81 per cent during the quarter.
“The bad-debt ratio
increase and decrease in capital adequacy ratio were within market
expectation.”
The rising bad debts come
as China’s sovereign wealth fund last Thursday took over
While the
CBIRC said that the banks’ credit quality remains stable, the data showed that
the lenders have seen their capital ratio fall along with the economy. China’s
gross domestic product grew at 6.2 per cent in the June quarter, the slowest
quarterly growth rate since 1992.
Chinese banks’ core tier 1 capital adequacy ratio – a key measure of a bank’s financial strength – declined to
10.71 per cent at the end of June, down 0.23 percentage points from three
months earlier.
Banks’ liquidity ratio dropped to
55.77 per cent at the end of June, down 1.04 percentage points from the
previous three months.”
七线谱:四大天王 ( The Big Four )
Because of the escalating trade war and other geopolitical risks, the stock price for these big 4 had plunged more than -35% from early 2018 since the trade
war started.
All Big Four stock price drops to below -1SD and with BOC at
-2SD now, but from the chart, it seems that there will still have room for
further, decrease by 10-20% if it is going to hit the level same as Global Finance
Crisis in 2008/09.
Bank of China
( PE :4.4 / PB :4.5 / ROE : 11.5% / Div Yield: 7.0%/ Tier 1 Cap Ratio:11.6%)
Industrial and Commercial Bank of China
( PE :5.2 / PB :5.1 / ROE : 13.0% / Div Yield: 5.7%/ Tier 1 Cap Ratio:13.2%)
China Construction Bank
( PE :5.1 / PB :5.2 / ROE : 13.4% / Div Yield: 6.0%/ Tier 1 Cap Ratio:14.2%)
Agricultural Bank of China
( PE :4.5 / PB :4.5 / ROE : 12.9% / Div Yield: 6.7%/ Tier 1 Cap Ratio:11.9%)
Since nobody knows how and when the trade may end, and it
might be a “black swan” that causing another global financial turmoil or
economy meltdown.
We will need to be cautious if going to buy into the story of “BIG
Four “, be nimble and take small bites first with position sizing
strategy in mind where you will have room to increase your position if things
turn really ugly eventually.
Cheers!
Quote Of The Day:
“I learned early that
there is nothing new in Wall Street. There can’t be because speculation is as
old as the hills. Whatever happens in the stock market today has happened
before and will happen again. I’ve never forgotten that.” – Jesse Livermore
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