China Banks: Deep value despite the NPL challenge
Financials
Galliano's Financials Research
In Victor Galliano’s China banks screen, he focuses on the credit quality headwinds going forward, as well as the returns trends that can absorb potentially worsening cost of risk charges. While China bank shares continue to be poor performers, Victor sees selective contrarian buy opportunities for those banks with deeply discounted valuations and strong balance sheets including credit quality metrics. He upgrades Ping An Bank to Buy and continues to favour Industrial Bank and CCB, although Minsheng remains a Sell.
Edition: 171
- 13 October, 2023
Financials
Galliano's Financials Research
On the back of 2Q22 results, Victor Galliano screens 9 large Chinese commercial banks’ core profitability, and their credit quality and coverage, to identify banks that are attractive value, have good earnings growth prospects and have the potential to deliver sustainably higher returns going forward. Ping An Bank stands out on valuation (especially PEG ratio). Victor believes that its returns could improve over the medium term especially from lower cost of risk given its credit quality strength. He also retains a positive view on CCB. However, Victor is negative on China Minsheng due to its low ROE, poor delinquency and NPL coverage.
Edition: 146
- 14 October, 2022