DOWNLOAD
Industrial and Commercial Bank of China
- Sector: Financial Services
- Sub Sector: Banks
- Region: China
- Credit Rating (Moody’s/Standard & Poor’s/Fitch): M/P
This article is exclusive to Metrobank preferred clients.
Log in your Wealth Manager account to get access to investment insights, bank views, and webinar videos.
Fundamental View
AS OF 18 May 2023Our credit view on ICBCAS (ratings: A1/A/A) is based on the strong likelihood of state support in the event of distress, given its large size, systemic importance and majority government ownership.
Its systemic importance is enhanced by its status as China’s largest lender, and it plays a key role in financing the country’s economic development.
The Big 4 banks are generally more prudently managed than their more aggressive smaller competitors, but they are also expected to support the real economy in a downturn.
Business Description
AS OF 18 May 2023- With total assets in excess of RMB 42 tn, ICBCAS is the world's largest bank by assets and is classified as a G-SIB with a capital surcharge of 1.5%.
- ICBCAS was originally set up in 1984 to provide loans to China's large state-owned industrial corporations.
- ICBCAS was recapitalised in 2005 with an injection of $15 bn, following which it was listed in Hong Kong and Shanghai in 2006.
- The government owns a majority of ICBCAS's shares through Central Huijin and the Ministry of Finance, which own stakes of 35% and 31% respectively.
- In addition to a strong onshore presence, ICBC has an extensive international network as well.
Risk & Catalysts
AS OF 18 May 2023China’s sovereign ratings (A1/A+/A+) underpin ICBCAS’s credit standing; any deterioration in the sovereign ratings could negatively affect ICBCAS’s ratings.
Asset quality risk remains as China’s economic momentum slows and the property sector remains under stress. Transparency is limited and credit risks are hard to assess in China as these often depend on the government’s willingness to socialise losses.
ICBCAS is managed on commercial terms but the government may call on it to perform “national service” that overrides profitability considerations. 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.
Key Metrics
AS OF 18 May 2023| RMB bn | FY19 | FY20 | FY21 | FY22 | 1Q23 |
|---|---|---|---|---|---|
| PPP ROA | 1.97% | 1.87% | 1.82% | 1.61% | 1.67% |
| Reported ROA | 1.08% | 1.00% | 1.02% | 0.97% | 0.89% |
| Reported ROE | 13.1% | 12.0% | 12.2% | 11.4% | 11.2% |
| Total Equity/Total Assets | 8.9% | 8.7% | 9.3% | 8.8% | 8.5% |
| CET1 Ratio | 13.2% | 13.2% | 13.3% | 14.0% | 13.7% |
| NPL Ratio | 1.43% | 1.58% | 1.42% | 1.38% | 1.38% |
| Provisions/Average Loans | 1.11% | 1.15% | 1.03% | 0.83% | 1.09% |
| Loan Deposit Ratio | 73% | 74% | 78% | 78% | 77% |
CreditSights View
AS OF 24 May 2023ICBCAS is the largest bank by assets in the world and has a very strong franchise in China. Its majority government ownership adds to its systemically important status – we view ICBC as a very strong and stable credit. 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. Its 1Q23 operating performance lagged its peers and it is the only Big 5 bank that saw a decline in operating income in 1Q23. Capital ratios remained the highest among Chinese banks.
Recommendation Reviewed: May 24, 2023
Recommendation Changed: July 16, 2021
Who We Recommend
Bank Rakyat Indonesia
Mitsubishi UFJ Financial Group
State Bank of India
