中金公司—中国工商银行 研究报告

（７８页　　英文） 　　 December 7, 2006

Riding the Tide of China’s Booming Economy

Initiate with ACCUMULATE Banking

Industrial and Commercial Bank of China (1398.HK)
Riding the Tide of China’s Booming Economy

Table of Contents
Valuation: Retail Banking Offers Long-term Upside Potential .............................................8
Positive Catalysts Ahead .............................................................................................................8
Intrinsic Value from Three-Stage DDM.................................................................................... 11
Financial Forecast.....................................................................................................................16
2006~2008 Outlook: Robust Earnings Growth.........................................................................16
Dividend Policy.........................................................................................................................21
Ups and Downs .........................................................................................................................21
Leading China’s Banking Sector.............................................................................................25
Market Leadership and Moderate Growth in Traditional Businesses .......................................25
First Mover and Dominant Player in Emerging Fee Businesses ...............................................27
Numerous Profit Drivers and Superior Diversification.............................................................29
Transforming Scale into Value-enhancing Growth ...............................................................31
Size Matters..............................................................................................................................31
Leverage Premier Branch Network and E-banking Channels...................................................31
Exploit High Quality Customer Base........................................................................................33
Industry Leading IT System Gives an Advantage .....................................................................36
Foreign Strategic Partners Lend Support ..................................................................................39
Gold Mining by DuPont Analysis............................................................................................41
Normalizing Financials .............................................................................................................41
ICBC Enjoys Strong Adjusted Pre-Provision Profitability........................................................42
Improving Risk Management to Weather Downturn Risk...................................................48
Improving Asset Quality ...........................................................................................................48
Continuous Evolution in Risk Management Framework ..........................................................54
Concerns...................................................................................................................................59
Appendix I: Restructuring and Reform .................................................................................63
Disposal of Non-performing Assets ..........................................................................................63
Strengthen Capital Base with Government Support..................................................................64
Streamline Business Operations................................................................................................66
Appendix II: International Experience Suggests Large Banks Enjoy Favorable Economies
of Scale......................................................................................................................................67
Appendix III: Key Financial Comparison..............................................................................71