China Construction Bank

  • Sector: Financial Services
  • Sub Sector: Banks
  • Country: China
  • Credit Rating (Moody’s/Standard & Poor’s/Fitch): M/P
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Detailed Information

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Fundamental View

AS OF 09 Nov 2022
  • Our credit view on China Construction Bank (CCB; ratings: A1/A/A) is based on the strong likelihood of state support in event of distress, given its large size, systemic importance and majority government ownership.

  • Its systemic importance is enhanced by the key role it plays in financing China’s economic development and its close government links (and large government shareholding).

  • CCB has maintained relatively stronger financial metrics in recent years as the Big 4 are generally more prudently managed than their more aggressive smaller competitors.

Business Description

AS OF 09 Nov 2022
  • CCB was originally formed in 1954 as a subsidiary of China's MOF to disburse funds intended for fixed asset investment. In the early 1980s, it started taking deposits and making loans outside of direct MOF control. In 1998, its NPLs were transferred to Cinda AMC in exchange for RMB 247 bn of Cinda bonds.
  • The bank was re-capitalised again in 2003 with an injection of $23 bn by the PBOC. It was listed in 2005 but the Chinese government remains its controlling shareholder with a 57% stake held through state-owned Central Huijin.
  • The bank owns CCB Asia and CCB International in Hong Kong as well as operations in a number of countries.
  • CCB is the second-largest of the Big 4 and is classified as a G-SIB requiring an additional capital surcharge of 1.5%.

Risk & Catalysts

AS OF 09 Nov 2022
  • China’s sovereign ratings (A1/A+/A+) underpin CCB’s credit standing. Any deterioration in the sovereign ratings could negatively affect CCB’s ratings.

  • Asset quality pressure is rising amid flagging economic momentum and risks stemming from the property sector. CCB has the largest balance of inclusive finance loans which may come under greater stress when relief measures end.

  • CCB may be asked by the government to perform “national service” that overrides profitability considerations, e.g. supporting troubled property developers and extending loans at lower rates during the pandemic. We would not regard such actions as credit-negative as they reflect close government links that also underpin the bank’s credit standing.

Key Metrics

AS OF 28 Feb 2023
RMB bn 9M22 9M21 FY21 FY20 FY19
PPOP ROA 1.79% 1.99% 1.87% 1.96% 2.01%
Reported ROA 1.02% 1.07% 1.04% 1.02% 1.11%
Reported ROE 12.8% 13.2% 12.6% 12.1% 13.2%
Equity/Assets 8.1% 8.4% 8.6% 8.4% 8.7%
CET1 Ratio 13.9% 13.4% 13.6% 13.6% 13.9%
NPL Ratio 1.40% 1.51% 1.42% 1.56% 1.42%
Provisions/Average Loans 0.95% 1.08% 0.95% 1.19% 1.14%
Loan-Deposit Ratio 84% 82% 84% 81% 82%
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CreditSights View

AS OF 09 Nov 2022

We maintain our Market perform recommendation on CCB. CCB is the 2nd-largest of the Chinese state-owned commercial banks and benefits from a strong franchise and close state links. It has posted peer-leading results and asset quality for years, along with strong capital ratios. Its profitability has recently been impacted by its social duties to support the real economy including stepping up lending at lower rates, but we do not regard such actions as credit-negative as they reflect the close government links that also underpin the bank’s credit standing. We view CCB as a core portfolio holding due to its strong B/S fundamentals and operational strength, particularly if market conditions are volatile. Spreads are relatively less attractive when compared to other Asian banks.

Recommendation Reviewed: November 01, 2022

Recommendation Changed: July 16, 2021

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