Global Bank Equity Specialist, Creative Portfolios

Paul Hollingworth

Global Bank Equity Specialist

Creative Portfolios

Equity Bottom-Up

Bank of Chongqing Co Ltd H / Equity Bottom-Up

As is often cited, China maintains certain advantages over other parts of the world regarding the terrible weight of C19 that is so devastating other parts of the globe and in relation to the interrelated current macro picture.<a href="https://www.smartkarma.com/entities/bank-of-chongqing-co-ltd-h" target="_blank" data-smartkarma-citation="entities:658:1" rel="noopener">Bank Of Chongqing Co Ltd H (1963 HK)</a>has been expanding its business well in recent years, whether it be Corporate, SME, Consumer, Trade Finance, Capital Markets, or Financial Leasing. Management is fortifying the application of financial technologies, with the online loan business growing fast, while deposits are growing forcefully. Balance Sheet expansion is broadly in line with the System. In addition, the Bank has strengthened governance, and put in place a mechanism for online tracking of asset quality and a risk monitoring system that combines micro and macro aspects. Management has beefed up risk control tools, advanced post-loan online service and the online management of credit authorisation and inquiry, and promoted the tools used to expand the credit business. Fintech innovation is centred on 5G, AI, blockchain and other technologies through lean management robots, remote banks, intelligent WAN and integrated operation and maintenance projects.Recent results show positive fundamental momentum and trends with clear improvement in Efficiency, NIM and Spread, as well as better headline Asset Quality, Liquidity and Provisioning. Given the increase in LLPs, Profitability though eroded slightly while Capital Adequacy deteriorated somewhat. Growth in “Core Income” was robust, especially in Net Interest Income, spurred by lower Funding Costs and System-like credit expansion of 13% YoY.<div class="content-highlight">A FV of 4%, a PBV of 0.37x, an Earnings Yield of 30.7%, a Dividend Yield of 5.3%, and a Total Return Ratio of 6x are highly attractive. The bank commands both a top quartile PH Score™ and VFM ranking. Chongqing is also a “3 year off, 1 year on” stock.</div>

As is often cited, China maintains certain advantages over other parts of the world regarding the terrible weight of C19 that is so devastating other parts of the globe and in relation to the interrelated current macro picture.Bank Of Chongqing Co Ltd H (1963 HK)has been expanding its business well in recent years, whether it be Corporate, SME, Consumer, Trade Finance, Capital Markets, or Financial Leasing. Management is fortifying the application of financial technologies, with the online loan business growing fast, while deposits are growing forcefully. Balance Sheet expansion is broadly in line with the System. In addition, the Bank has strengthened governance, and put in place a mechanism for online tracking of asset quality and a risk monitoring system that combines micro and macro aspects. Management has beefed up risk control tools, advanced post-loan online service and the online management of credit authorisation and inquiry, and promoted the tools used to expand the credit business. Fintech innovation is centred on 5G, AI, blockchain and other technologies through lean management robots, remote banks, intelligent WAN and integrated operation and maintenance projects.Recent results show positive fundamental momentum and trends with clear improvement in Efficiency, NIM and Spread, as well as better headline Asset Quality, Liquidity and Provisioning. Given the increase in LLPs, Profitability though eroded slightly while Capital Adequacy deteriorated somewhat. Growth in “Core Income” was robust, especially in Net Interest Income, spurred by lower Funding Costs and System-like credit expansion of 13% YoY.A FV of 4%, a PBV of 0.37x, an Earnings Yield of 30.7%, a Dividend Yield of 5.3%, and a Total Return Ratio of 6x are highly attractive. The bank commands both a top quartile PH Score™ and VFM ranking. Chongqing is also a “3 year off, 1 year on” stock.

Bank of Chongqing: Robust Trends and Cheap Valuation Characterise Chongqing