Nomura Int：ANCHOR REPORT－China Banks 中国银行业

02.27 42页 英文

We think investors in China banks have a number of sweet reasons to stay bullish.While the bottoming of NIMs in 2H06F is now the consensus view, we contend the market has not fully appreciated the boost from changes in banks’ loan and deposit mix. With funding costs being kept in check despite rising interest rates, our NIM forecasts for 2H06 and FY07F are ahead of market expectations. The topping is a major tax break that we think we are the first to factor into our estimates — we believe salary expenses will become tax deductible from 2H06, leaving consensus forecasts far behind. We upgrade BOC to STRONG BUY, reiterate our BUYs on ICBC and CCB,
and initiate coverage of CMB and Bocom with BUY ratings

Contents
Change in loan mix to boost asset yields 3
Net interest spread resumes incline 3
New loan mix, higher asset yields 4
Low-cost deposits check funding costs 7
Negative deposit migration trimming funding costs 7
Tax deduction more key than reduction 9
Lower standard rate, but change in business tax unlikely 9
Tax deductible expenses 10
Operating environment still challenging 13
Reserve rate hike to cap loan growth 13
Mounting competition – long-term threat 13
BOC, ICBC and CMB stand out 15
Company profiles 17
Bank of China Ltd 17
China Construction Bank 21
ICBC 24
China Merchants Bank Co Ltd 27
Bank of Communications 30
Appendix — Peer summary 33