大摩-银行业深度-看好大银行

Morganstanley

August15,202403:44PMGMT

RESEARCH

AsiaPacificInsight

China–Banks

Lookforoutperformancefor

thefourthyearinarow

WethinkChina'smajorshifttoprioritizefinancialrisk

containmentvs.supportinggrowthwillcontinuetopayoffandhelpmajorbankstogeneratesustainableshareholderreturnsinamoreprudentdevelopmentenvironmentinChina,inwhich

valueanddividendscouldstilloutperform.

Chinahaseffectivelyshiftedfocusfromgrowthtoriskcontainment…Thismajorshift–whichstartedin2021–hasproventobesustainable,despiteinitialmarketsuspicions.

...whichhasledtothreeyearsofoutperformance(2022-2024YTD)foritsbankstocks:TotalreturnsforbothA-shareandH-sharebanksthatwecoveronaveragewere~35%forthepastthreeyearsasofJuly30,2024.Theywerearound-25%and-28%fortheCSI300andHangSengIndex,respectively.

WeexpectNIMtostabilize…Underthenewmonetarypolicyframework,we

expectmodestNIMpressurein2025andsomereboundin2026.Thiscoulddrivemodestrecoveryinprofitgrowthdowntheroad.

...withlowerlong-termrisks...Policymakershaveheightenedtheirfocusinrecentmonths.Enforcementofthevariousnewriskcontainmentpolicieshasbeen

dedicated.Prioritizingrisksvs.growthcouldcontainlong-termcreditcostsforbanks.

...whichwebelieveshouldboostmarketconfidenceintheearningsanddividendoutlook…Weexpectbanks'ROEonaveragetostabilizeat~10%in2025and2026whileprofitgrowthcanbemaintainedatastablepace.WealsoseesomeroomforbankstoreleaseprovisionbuffertocushionindustrialNPLs,therebykeepingcreditcostsmanageableandsupportingstableearningsanddividends.

...drivingthefourthyearofoutperformancein2025amidthetransitionin

China'sdevelopmentmodel:TheeconomictransitioninChinaisstillchallenging.Globaluncertaintycouldalsoriseoverthenext1-2years.YetwebelievestableprofitsanddividendsforChina'sbanks,supportedbytheriskcontainmenteffortsandstabilizingNIM–combinedwithlowerreturnsonalternativeinvestments–coulddrivemorefundflowstothesestocks.

PSBC(1658.HK)isournewTopPick…Weviewitasbestpositionedforpotentiallyhigherassetyieldsandlowerdepositrates.

...andweseestillgoodreturnpotentialinanumberofotherbankstocks:Inparticular,weciteCCB-H(0939.HK),Ningbo(002142.SZ),MinshengBank-H

(1988.HK),andIndustrialBank(601166.SS).

MorganStanleyAsiaLimited+

RichardXu,CFA

EquityAnalyst

Richard.Xu@+8522848-6729

ChiyaoHuang

EquityAnalyst

Chiyao.Huang@+8523963-4624

BerylYang

ResearchAssociate

Beryl.Yang@+8523963-2224

ChinaFinancials

AsiaPacific

IndustryViewAttractive

What’sChanged

From

1988.HK

To

1658.HK

PostalSavingsBankofChinaCoLtd(1658.HK)

TopPick

Relatedreports:

China's3DJourney–Financials:Assessingthecostofsupportingongoingindustrialupgrades(21May2024)

ChinaFinancials:Trackingindustrialrisk:Moresignsofearlierthanexpectedcapacity

rationalization(2Jul2024)

ChinaFinancials:ThirdPlenumdecisionstoreducefinancialriskfurther(22Jul2024)

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Research.InvestorsshouldconsiderMorganStanley

Researchasonlyasinglefactorinmakingtheirinvestmentdecision.

Foranalystcertificationandotherimportantdisclosures,refertotheDisclosureSection,locatedattheendofthisreport.

+=Analystsemployedbynon-U.S.affiliatesarenotregisteredwithFINRA,maynotbeassociatedpersonsofthememberandmaynotbesubjecttoFINRArestrictionson

communicationswithasubjectcompany,publicappearancesandtradingsecuritiesheldbyaresearchanalystaccount.

2

Morganstanley

RESEARCH

AsiaPacificInsight

Introduction

Aquickrecapofperformancehistory

China'sbanksde-ratedoverthepast10yearswithsomeaccelerationbetween2021-2022:Thisreflectslingeringconcernsaboutfinancialsystemrisksandsacrificingbanks'profitabilitytosupporttherealeconomy.Infact,variousformsofwindowguidance

weighedonbanks'performance,especiallyin2021and2022.

However,thede-ratinghasbeenmorenotablethanthemoderationinbanks'profitability–banksonaveragestillreportedrelativelyresilientROEandpostedstableprofitgrowthoverthesameperiod,supportedbytheirthickprovisionbuffer,whilethemacro

environmentandgeneralcorporateearningsshowedmorevolatilityintheseyears.

Banks'outperformancebecamemorenotablein2023and2024YTD,asthepolicyfocusonriskcontainmenthasgraduallytranslatedintomorestablethanexpectedassetquality,helpingtoalleviateconcernsaboutlong-termrisksandcosttoshareholders.

Exhibit1:China'sbanksde-ratednotablyoverthepast10yearsorso,butvaluationhasgraduallystabilizedsince2023

ChinabanksPBvsROE&NPAT

1.20

1.00

0.80

0.60

0.40

0.20

-

16.4%

14.8%

14.1%

NPAT(Rmbbn)

ROE

13.3%

12.8%

2,303

11.7%

114%

11.8%11.2%

.

HsharefwdPB

2,377

AsharefwdPB

Jan-14

Apr-14

Jul-14

Oct-14

Jan-15

Apr-15

Jul-15

Oct-15

Jan-16

Apr-16

Jul-16

Oct-16

Jan-17

Apr-17

Jul-17

Oct-17

Jan-18

Apr-18

Jul-18

Oct-18

Jan-19

Apr-19

Jul-19

Oct-19

Jan-20

Apr-20

Jul-20

Oct-20

Jan-21

Apr-21

Jul-21

Oct-21

Jan-22

Apr-22

Jul-22

Oct-22

Jan-23

Apr-23

Jul-23

Oct-23

Jan-24

Apr-24

Jul-24

1,5551,748

1,993

1,593

1,649

1,939

2,184

1,830

Source:FactSet,MorganStanleyResearch

Totalreturns(%)

H-shareaverage*

HangSengIndex

A-shareaverage*

CSI300

2022

(0.08)

(12.54)

0.28

(19.84)

2023

6.01

(10.46)

4.41

(9.14)

2024YTD**

24.09

3.04

23.95

0.51

*H-shareaverage:averageofourH-sharecoverage;Ashareaverage:averageofourA-sharecoverage.Weusetotalreturnsastheperformancemeasurement,whichincludedividends.

**2024YTDis1/1/2024-7/30/2024

Morganstanley

RESEARCH

AsiaPacificInsight

Ourfundamentaloutlookinbrief

Weseeongoingcoordinatedpolicyeffortstocontainandreducefinancialsystem

risks,whichshouldfurtherreducemarketconcernaboutbankrisks:Thoughinitiallymeetingmarketsuspicionsaboutsustainability,China'smajorshifttoprioritizingfinancialriskreductionvs.supportinggrowth–whichstartedin2021–haspaidoffandproventobesustainable.Inparticular,wenoteheightenedfocusbypolicymakersinrecentmonthsanddedicatedenforcementofthevariousnewriskcontainmentpolicies.

Inaddition,weseerecentpoliciestocontainviciouscompetitionandirrationalgrowthinindustrialinvestmentasanotherexampleofprioritizingrisksvs.growth.Thiscould

containlong-termcreditcostsforbanks.

Weexpectonlyamodestincreaseinbankcreditcostsifindustrialinvestmentgrowthbeginstorationalize.

Wealsoexpectcontinuedsmooth/moderatingNPLformationinLGFVandpropertyloans,particularlyasChinaapproachestheendofthiscycleofpropertyNPLformation.

Newmonetarypolicyframeworkshouldsupportbanks'NIMandROE:Anotherkey

marketconcernregardingChina'sbankshasbeendecliningratesandNIM,particularlyaswindowguidanceonbothloanvolumeandyieldshaseffectivelyledtomanyasymmetricratecuts.

WebelievereducedfocusonloanandTSFvolumegrowthandthenewinterestratetransmissionframeworkwillsupportmorerationalNIMformajorbanksinChina.

WeexpectmodestNIMpressurein2025andsomereboundin2026,whichshouldgivethemarketmoreconfidenceinearningsanddividendsustainability.

Valuationisstilllow…AverageforwardP/Bis0.38xand0.52xforH-shareandA-sharebankswecover,respectively,comparedtoaround0.6xand0.9xinearly2021.Meanwhile,theaverageROEofourcoveredbanksdroppedjustmodestly,from11.45%in2020to

11.22%in2023.

…anddividendyieldsarehigh…OurcoveredH-sharebanksoffer7-9%dividendyield,withSOEbanksataround8%asofAugust2024.A-sharebanks'yieldsareslightlylower,largelybetween5-7%,butstillattractivegiventhelowerrateenvironmentonshore.

Exhibit2:2024EH-sharedividendyields

9.49.1

10.09.08.07.06.05.04.03.02.01.0

-

Hsharedividendyield2024E(%)

8.9

8.07.97.8

7.57.4

7.06.9

5.6

Source:MorganStanleyResearchestimate(E)

Exhibit3:2024EA-sharedividendyields

7.47.4

6.7

6.46.46.46.46.36.3

8.07.06.05.04.03.02.01.0

-

Asharedividendyield2024E(%)

5.35.35.25.15.14.9

3.23.0

Source:MorganStanleyResearchestimate(E)

MorganStanleyResearch3

Morganstanley

RESEARCH

AsiaPacificInsight

4

...whichwethinkshoulddrivethefourthstraightyearofoutperformancein2025

underthemoreprudentdevelopmentmodelinChina,particularlyinanenvironmentofdecliningdepositrates:WebelievetheriskcontainmenteffortsandstabilizingNIM

underthenewmonetarypolicyframeworkshouldsupportstableprofitsanddividendsforChina'sbanksamidthestillchallengingeconomictransitioninChinaandpotentiallyrising

globaluncertaintyoverthenext1-2years.This,combinedwithlowerreturnson

alternativeinvestmentssuchasMMFanddeposits,coulddrivemoreflowoffundstoChina'sbanks.

Favoredstocksagainstthisbackdrop

WemoveourTopPicktoPSBC-H:Wethinkthisbankisbestpositionedtobenefitfromstableloanyield,potentiallyhigherbondyield,andlowerdepositrates,thankstoits

balancesheetstructureandlargerfixedcostbaseinagencyfees.ThenegotiationwithPostalGrouptoreduceagencyfeescouldbeanupcomingcatalyst,expectedin2H24,whilemarketexpectationslooklowcomparedtothelasttimeitnegotiatedtheagencyfeeadjustment.Inaddition,PSBCislessexposedtomanufacturingloansthanpeers,

whichshouldleadtomorestablecreditcostsforthebankasthefinancialsystemstartstodigestindustrialcreditrisks.

...andseestillgoodreturnpotentialinanumberofotherbanks,suchas:

•CCB-H:CCB-Hisdefensive,withcurrentlystillthehighestdividendyieldat~8%amongH-shareSOEbanks.CCBhasshownmorerationalbalancesheetexpansioninrecentquartersdespitewindowguidanceonloangrowth,whichcouldbettersupportmarginsandcontrolcreditrisks.ItsNIMisalsothehighestamongSOE

banksandisaboveindustryaverage,at1.57%in1Q24.WeremainEWonCCB-Agivenlowerdividendyieldat5.3%(2024e).

•Ningbo:ThebankhasbeenabletomaintainitsmarketshareinZhejiangwithitsclient-centricstrategy,customizedservices,andthepracticeoffrequentclient

visitsdespitefiercecompetitionfromSOEbanksinthepastseveralyears.Morerationalloananddepositpricing,drivenbymonetarypolicychange,shouldhelpthebankre-acceleratemarketsharegainswhilekeepingpricingpower.Despite

moreexposuretolocalmanufacturersandexporters,weareconfidentinNingbo'sabilitytodigestmanufacturingrisks,astestedbyvariouspastcycles.

•MinshengBank-H:WecontinuetobelievethatMinshengBank'sROEwillbe

restoredgradually–legacyriskshavelargelybeendigested–althoughitcould

takemoretimebecausethebankchangeditsstrategytofocusonlong-term

developmentviathebuildupofastrongclientbase,onwhichwehaveseengoodprogress.WethinkstabilizingNIM,pickupinbalancesheetgrowthandmoderatingcreditrisksshoulddriveROEgraduallyhigher.WemaintainEWonMinsheng-A

givendividendyieldat6.4%(2024e)islowerthanMinsheng-H'sat8.9%.

•IndustrialBank:IndustrialBankmaintainsitscompetitiveadvantagesinloan

pricingandriskmanagement,ledbydepartmentalcooperationandastrongin-

houseresearchteam.Comprehensivesolutionsandin-depthindustryknowledgecouldhelpthebanktoquicklyidentifyopportunitiesandgainmarketshare,

especiallyasoverallcreditgrowthshouldgraduallymoderateinthecomingyears.

Wherewecouldbewrong

OurscenarioofoverinvestmentandPPIdeflationdraggingonto2027couldnotablyimpairbankcapital

Inascenarioofrisingmultipolarworldchallenges,weseenotablyhigherNPLrisksforthebanksifChinesemanufacturerscontinuetooverinvesttomaintaincostcompetitivenesstodefendglobalmarketshare,sacrificingmarginandresultinginPPIdeflation.We

estimatethatNPLratiocouldreach~18%withinmanufacturingcreditsby2027inthisscenario,anditcouldtake4-5yearsforthebankstodigestindustrialNPLs,atRmb2.8tnperyear.SystemicriskscouldalsoriseasweakerbankswiththinmarginsandmodestprovisionbufferscouldbedraggeddownbythemountingNPLs,weighingonthebankstocksasawhole.

Overlylowinterestrateswoulderodebanks'riskdigestioncapabilityintheupcomingindustrialNPLcycleandweighonROE

Astheultimatemonetarytransmissionmechanismisstillaworkinprogress,wethinktheextenttowhichbankscouldrestoretheirriskpremiuminloanpricingwillbekeyto

monitor.ItwillbeespeciallyimportantforbankstostrengthentheircapabilitytodigestriskwithindustrialNPLsgraduallysurfacingin2025andbeyond.However,ifcorporate

loanyieldscontinuetofallto~3%overtime,weestimatethatitwouldtranslateinto-

0.3%ROAforbanks'industrialloans,whichwoulderodetheirprovisionbuffersandaffectROE.Thiscouldagainleadtoconcernsaboutthesustainabilityofdividendsandputourinvestmentcaseatrisk.

MorganStanleyResearch5

6

Morganstanley

RESEARCH

AsiaPacificInsight

Orderofpreference

Exhibit4:Orderofpreference–H-shares

Hshare

Orderofpreference

NamePSBCMinshengCCBCMBBOCABCICBCCiticBOCOMCEBCQRCB

StockcodeRating

Currency

1658-HK1658.HK

OverweightHKD

1988-HK1988.HK

OverweightHKD

939-HK0939.HK

OverweightHKD

3968-HK3968.HK

OverweightHKD

3988-HK3988.HK

OverweightHKD

1288-HK1398-HK998-HK1288.HK1398.HK0998.HK

OverweightOverweightEqual-WeightHKDHKDHKD

3328-HK3328.HK

UnderweightHKD

6818-HK6818.HK

UnderweightHKD

3618-HK3618.HK

UnderweightHKD

CurrentpricePricetarget

Targetupside(%)

Marketcap(RMB$mn)

4.15HKD5.30HKD

28

355,307

2.71HKD4.20HKD

55

142,381

5.55HKD7.10HKD

28

1,301,178

32.50HKD44.50HKD

37

796,170

3.40HKD4.60HKD

35

1,252,194

3.51HKD4.40HKD

25

1,469,569

4.48HKD5.60HKD

25

1,975,439

4.60HKD4.50HKD

-2

261,438

5.76HKD5.00HKD

-13

477,965

2.36HKD1.80HKD

-24

161,873

3.78HKD2.60HKD

-31

39,603

Streetview

Blue-Overweight

Yellow-Equal-weightGreen-Underweight

MSvsConsensus

NPAT24eNPAT25e

5%6%

11%15%

1%0%

2%2%

3%2%

3%3%

2%1%

4%3%

2%0%

0%-1%

-1%-1%

PE

2024e2025e

4.7e4.4e

3.4e3.2e

3.9e3.8e

5.2e5.0e

4.2e4.2e

4.3e4.2e

4.1e4.1e

3.3e3.1e

4.6e4.6e

3.5e3.4e

3.6e3.4e

PB

2024e2025e

0.45e0.42e

0.20e0.19e

0.41e0.38e

0.74e0.67e

0.39e0.36e

0.40e0.38e

0.40e0.38e

0.32e0.29e

0.41e0.38e

0.24e0.23e

0.30e0.28e

ROE-%

2024e2025e

10.0e10.0e

5.9e6.1e

10.8e10.2e

14.8e14.2e

9.5e9.0e

10.4e10.1e

10.1e9.5e

10.2e9.7e

9.1e8.6e

7.9e7.7e

8.8e8.6e

Priceperformance

PSBC

Minsheng

CCB

CMB

BOC

ABC

ICBC

Citic

BOCOM

CEB

CQRCB

1MAbsPerf

-5%

-5%

-2%

-9%

-5%

1%

0%

-4%

-2%

-4%

-5%

3MAbsPerf

-5%

-8%

0%

-12%

-8%

-5%

0%

-6%

-4%

-6%

3%

YTDAbsPerf

11%

2%

19%

19%

14%

17%

17%

25%

18%

2%

25%

Pastperformanceisnoguaranteeoffutureresults.Resultsshowndonotincludetransactioncosts.

Source:MorganStanleyResearch,FactSet;e=MorganStanleyResearchestimates.ClosingpricesasofAugust12,2024.

Morganstanley

RESEARCH

AsiaPacificInsight

Exhibit5:Orderofpreference–A-shares

Ashare

Orderofpreference

NameNingboIndustrialCMBPABChengduMinshengHangzhouBOCBeijingABCICBCCCBCITICBoComHuaxiaCEBSPDB

StockcodeRating

Currency

002142-CN601166-CN600036-CN000001-CN601838-CN600016-CN600926-CN601988-CN601169-CN601288-CN601398-CN601939-CN601998-CN601328-CN600015-CN601818-CN600000-CN

002142.SZ601166.SS600036.SS000001.SZ601838.SS600016.SS600926.SS601988.SS601169.SS601288.SS601398.SS601939.SS601998.SS601328.SS600015.SS601818.SS600000.SS

OverweightOverweightOverweightOverweightOverweightEqual-WeightEqual-WeightEqual-WeightEqual-WeightEqual-WeightEqual-WeightEqual-WeightUnderweightUnderweightUnderweightUnderweightUnderweightRMBRMBRMBRMBRMBRMBRMBRMBRMBRMBRMBRMBRMBRMBRMBRMBRMB

CurrentpricePricetarget

Targetupside(%)

Marketcap(RMB$mn)

20.3634.30

68

134,061

16.2822.20

36

339,032

32.1243.80

36

796,170

10.0113.60

36

193,090

14.0918.70

33

54,120

3.404.20

24

142,381

12.87

13.20

3

76,441

4.664.50

(3)

1,252,194

5.345.20

(3)

114,384

4.644.30

(7)

1,469,569

5.995.50

(8)

1,975,439

7.607.00

(8)

1,301,178

6.114.40

(28)

261,438

7.374.90

(34)

477,965

6.134.00

(35)

95,481

3.101.80

(42)

161,873

8.584.30

(50)

252,134

Streetview

Blue-Overweight

Yellow-Equal-weightGreen-Underweight

MSvsConsensus

NPAT24e

2%

2%

2%

4%

1%

11%

-5%

3%

7%

3%

2%

1%

4%

2%

5%

0%

-11%

NPAT25e

2%

1%

2%

3%

-2%

15%

-11%

2%

3%

3%

1%

0%

3%

0%

4%

-1%

-17%

PE

2024e

4.9e

4.6e

5.6e

4.4e

4.2e

4.7e

5.0e

6.3e

5.1e

6.2e

6.0e

5.8e

4.8e

6.5e

3.7e

5.1e

8.0e

2025e

4.4e

4.4e

5.3e

4.3e

3.7e

4.3e

4.5e

6.3e

5.1e

6.0e

6.0e

5.7e

4.6e

6.5e

3.7e

4.9e

8.0e

PB

2024e

0.67e

0.44e

0.79e

0.44e

0.71e

0.27e

0.69e

0.59e

0.43e

0.58e

0.58e

0.61e

0.47e

0.57e

0.33e

0.35e

0.40e

2025e

0.60e

0.41e

0.72e

0.41e

0.59e

0.26e

0.60e

0.55e

0.41e

0.54e

0.55e

0.56e

0.43e

0.54e

0.31e

0.33e

0.38e

ROE-%

2024e

14.6e

10.0e

14.8e

10.6e

18.5e

5.9e

14.9e

9.5e

8.8e

10.4e

10.1e

10.8e

10.2e

9.1e

9.1e

7.9e

5.0e

2025e

14.4e

9.6e

14.2e

10.0e

17.5e

6.1e

14.2e

9.0e

8.2e

10.1e

9.5e

10.2e

9.7e

8.6e

8.6e

7.7e

4.9e

Priceperformance

Ningbo

Industrial

CMB

PAB

Chengdu

Minsheng

Hangzhou

BOC

Beijing

ABC

ICBC

CCB

CITIC

BoCom

Huaxia

CEB

SPDB

1MAbsPerf

-7%

-4%

-6%

-3%

-5%

-9%

-1%

-2%

-5%

1%

-1%

3%

-6%

-1%

-6%

-6%

-3%

3MAbsPerf

-16%

-5%

-9%

-8%

-11%

-13%

-5%

5%

-6%

7%

12%

8%

-12%

6%

-9%

-3%

9%

YTDAbsPerf

1%

0%

15%

7%

25%

-9%

29%

17%

18%

27%

25%

17%

16%

28%

9%

7%

30%

Pastperformanceisnoguaranteeoffutureresults.Resultsshowndonotincludetransactioncosts.

Source:MorganStanleyResearch,FactSet;e=MorganStanleyResearchestimates.ClosingpricesasofAugust12,2024.

MorganStanleyResearch7

8

Morganstanley

RESEARCH

AsiaPacificInsight

Policypriorityshiftfromgrowthtoriskcontainmenthas

supportedbanks'outperformance

DespiteconcernsaboutChina'seconomicgrowthtrajectoryandfinancialrisks,China's

bankshaveingeneralshownstableearningsandshareholderreturn,andoutperformedthemarket(boththeCSI300andHSI)forthreeconsecutiveyears.Coordinatedpolicyeffortstocontainfinancialsystemriskshavebeenplayingakeyroleindissipatingmarketconcernsaboutvariousbankrisksandledtotheoutperformance.

Lookingahead,wethinkChina'smajorshifttoprioritizefinancialriskcontainmentvs.

supportinggrowthwillcontinuetopayoffandhelpmajorbankstogeneratesustainableshareholderreturnsinamoreprudentdevelopmentenvironmentinChina,inwhichvalueanddividendscouldstilloutperform.

Notably,weareseeingevenmorefocusinrecentmonthsbypolicymakersanddedicatedenforcementofthevariousnewriskcontainmentpolicies,includingreducedwindow

guidanceonindustrialloangrowth,whichshouldhelpaddressirrationalindustrialinvestmentandassociatedcreditrisks.

Againstthisbackdrop,weexpectbanks'ROEonaveragetostabilizeataround10%in

2025and2026whileprofitgrowthcanbemaintainedatastablepace.Potentially

reboundingNIMin2026coulddrivemodestrecoveryinprofitgrowthdowntheroad.Atthesametime,whileweexpectbanksstarttodigestindustrialcreditsin2025,NPL

formationinotherareassuchaspropertyandinfrastructureshouldcontinuetomoderate,leadingtoamodestriseofNPLformationfrom0.87%in2023to0.97%in2026.Wealso

seesomeroomforbankstoreleaseprovisionbuffertocushionindustrialNPLs–thereforekeepingcreditcostatamanageablelevel,supportingstableearningsanddividends.

Exhibit6:ROEwillcontinuetomoderatethrough2026E,butataresilientlevelof~10%

ROE

2021

2022

2023

2024E

2025E

2026E

ICBC

12.16%

11.46%

10.67%

10.06%

9.46%

9.06%

CCB

12.54%

12.31%

11.61%

10.82%

10.25%

9.77%

ABC

11.54%

11.30%

10.92%

10.45%

10.06%

9.66%

BOC

11.23%

10.76%

10.11%

9.50%

9.01%

8.60%

BoCom

10.76%

10.34%

9.69%

9.06%

8.58%

8.26%

CMB

16.96%

17.06%

16.15%

14.78%

14.15%

13.78%

Citic

10.73%

10.80%

10.80%

10.16%

9.71%

9.31%

Minsheng

6.58%

6.30%

6.09%

5.95%

6.09%

6.23%

CRCB

9.63%

9.42%

9.28%

8.83%

8.59%

8.65%

Ningbo

15.77%

15.53%

15.05%

14.57%

14.36%

14.18%

Hangzhou

12.34%

14.06%

15.57%

14.82%

14.16%

13.66%

Industrial

12.62%

13.90%

13.85%

10.64%

9.97%

9.58%

PAB

10.81%

12.36%

11.37%

10.56%

9.96%

9.85%

CEB

10.63%

10.25%

8.46%

7.91%

7.72%

7.68%

SPDB

8.76%

7.98%

5.21%

5.01%

4.84%

4.93%

Huaxia

9.04%

8.88%

8.71%

9.12%

8.55%

8.14%

PSBC

12.01%

11.89%

11.02%

9.99%

10.04%

9.79%

Chengdu

17.55%

19.37%

19.04%

18.48%

17.47%

15.79%

Beijing

10.62%

10.26%

9.59%

9.31%

8.66%

8.31%

Average

11.70%

11.80%

11.22%

10.53%

10.09%

9.75%

Source:Companydata,MorganStanleyResearchEstimate(E)

Exhibit7:Weexpectprofitgrowthtorecoverin2024E-2026Efromalow2023

YoY

YoY

YoY

YoY

YoY

YoY

Rmbmn

2021

2022

2023

2024E

2025E

2026E

NPAT

ICBC

10.3%

3.7%

0.8%

0.3%

0.9%

2.4%

CCB

11.6%

7.3%

2.4%

0.3%

1.5%

2.5%

ABC

11.7%

7.5%

3.9%

0.4%

3.4%

3.0%

BOC

12.3%

4.6%

2.4%

0.6%

0.8%

1.9%

BoCom

11.9%

5.2%

0.7%

0.1%

0.4%

3.1%

CMB

23.2%

15.1%

6.2%

1.7%

5.2%

6.8%

Citic

13.6%

11.6%

7.9%

1.7%

3.7%

5.1%

Minsheng

0.2%

2.6%

1.6%

1.9%

6.4%

7.7%

CRCB

13.8%

7.5%

6.1%

2.2%

4.2%

7.6%

Ningbo

29.9%

18.1%

10.7%

10.2%

10.3%

10.5%

Hangzhou

29.8%

26.1%

23.2%

10.0%

10.6%

10.8%

Industrial

24.1%

10.5%

-15.6%

1.0%

3.4%

5.1%

PAB

25.6%

25.3%

2.1%

1.4%

2.0%

6.3%

CEB

14.7%

3.2%

-9.0%

-4.5%

2.7%

4.2%

SPDB

-9.1%

-3.5%

-28.3%

0.3%

0.6%

5.8%

Huaxia

10.6%

6.4%

5.3%

0.3%

0.7%

1.3%

PSBC

18.6%

11.9%

1.2%

0.2%

7.3%

4.3%

Chengdu

30.0%

28.2%

16.2%

11.0%

9.7%

10.1%

Beijing

3.5%

11.4%

3.5%

4.7%

0.6%

1.6%

Average

15.1%

10.7%

2.2%

2.3%

3.9%

5.3%

Source:Companydata,MorganStanleyResearchEstimate(E)

Morganstanley

RESEARCH

AsiaPacificInsight

Exhibit8:Weexpectcreditcostwillstarttopickupin2025E...

Creditcost

2021

2022

2023

2024E

2025E

2026E

ICBC

1.03%

0.83%

0.61%

0.53%

0.57%

0.66%

CCB

0.95%

0.78%

0.61%

0.51%

0.54%

0.65%

ABC

1.03%

0.79%

0.64%

0.60%

0.58%

0.66%

BOC

0.70%

0.63%

0.57%

0.53%

0.55%

0.62%

BoCom

1.10%

0.90%

0.76%

0.66%

0.66%

0.72%

CMB

1.25%

0.99%

0.66%

0.57%

0.64%

0.75%

Citic

1.65%

1.43%

1.17%

1.02%

1.06%

1.15%

Minsheng

1.99%

1.21%

1.11%

1.07%

1.10%

1.15%

CRCB

1.99%

1.29%

0.91%

0.98%

1.00%

1.01%

Ningbo

1.60%

1.09%

0.78%

0.85%

0.86%

0.92%

Hangzhou

0.88%

0.45%

0.72%

0.54%

0.50%

0.52%

Industrial

1.60%

1.03%

1.17%

1.09%

1.13%

1.20%

PAB

2.58%

2.23%

1.75%

1.50%

1.53%

1.55%

CEB

1.73%

1.47%

1.41%

1.33%

1.38%

1.49%

SPDB

1.68%

1.57%

1.55%

1.49%

1.53%

1.57%

Huaxia

1.63%

1.37%

1.13%

1.14%

1.15%

1.21%

PSBC

0.77%

0.52%

0.34%

0.36%

0.40%

0.46%

Chengdu

1.21%

0.86%

0.49%

0.52%

0.51%

0.51%

Beijing

1.32%

0.87%

0.77%

0.72%

0.66%

0.73%

Average

1.40%

1.07%

0.90%

0.84%

0.86%

0.92%

Source:Companydata,MorganStanleyResearchEstimate(E)

Exhibit9:…owingtohigherindustrialNPLformation,butimpactonearningsshouldbemanageable

NPLformationratio

2021

2022

2023

2024E

2025E

2026E

ICBC

0.54%

0.55%

0.46%

0.44%

0.54%

0.54%

CCB

0.40%

0.42%

0.41%

0.40%

0.49%

0.55%

ABC

0.46%

0.49%

0.40%

0.41%

0.41%

0.50%

BOC

0.62%

0.55%

0.54%

0.52%

0.60%

0.65%

BoCom

0.81%

0.74%

0.53%

0.53%

0.57%

0.62%

CMB

0.61%

0.80%

0.82%

0.82%

0.88%

0.93%

Citic

1.32%

1.20%

1.17%

1.17%

1.24%

1.28%

Minsheng

1.51%

1.28%

1.09%

1.09%

1.14%

1.19%

CRCB

1.58%

1.23%

0.70%

0.69%

0.78%

0.86%

N