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Global Bank Equity Specialist, Creative Portfolios

Paul Hollingworth

Global Bank Equity Specialist

Creative Portfolios

Thematic (Sector/Industry)

China Financials / Thematic (Sector/Industry)

Initial Q320 data to date out of China show a somewhat mediocre picture:•Moderate reduction in ROA &amp; ROE;•A narrowing of NIM though not at Minsheng;•General erosion in Efficiency though not at Ping An, Minsheng &amp; China Everbright;•Deterioration in Capital Adequacy as measured by E/A;•Slightly Improved headline Asset Quality though not at China Everbright and China Merchants: underlying systemic picture is less benign (net new NPLs, inclusive of NCOs);•Higher LDR though not at China Everbright;•Higher Provisioning though not at Ping An &amp; China Merchants;•&lt;5 average PH Score™. This is not a bullish signal.<div></div><div class="content-highlight">The PH Score™ is a fundamental momentum-quantamental score that scores banks according to changes in value-quality. The Score encompasses Profitability, Operating Efficiency, Liquidity, Capital, Asset Quality, and Coverage as well as a valuation variable. Scores lie between 0 and 10, with higher scores representing more positive signs. The PH Score™ was back tested over 2007-17 for global banks and conclusively shows progressively higher returns across quintiles ranked by Score. </div>

Initial Q320 data to date out of China show a somewhat mediocre picture:•Moderate reduction in ROA &amp; ROE;•A narrowing of NIM though not at Minsheng;•General erosion in Efficiency though not at Ping An, Minsheng &amp; China Everbright;•Deterioration in Capital Adequacy as measured by E/A;•Slightly Improved headline Asset Quality though not at China Everbright and China Merchants: underlying systemic picture is less benign (net new NPLs, inclusive of NCOs);•Higher LDR though not at China Everbright;•Higher Provisioning though not at Ping An &amp; China Merchants;•&lt;5 average PH Score™. This is not a bullish signal.The PH Score™ is a fundamental momentum-quantamental score that scores banks according to changes in value-quality. The Score encompasses Profitability, Operating Efficiency, Liquidity, Capital, Asset Quality, and Coverage as well as a valuation variable. Scores lie between 0 and 10, with higher scores representing more positive signs. The PH Score™ was back tested over 2007-17 for global banks and conclusively shows progressively higher returns across quintiles ranked by Score. 

China Banks: Subpar Trends for Income Investors